Jefferies says it’s time to buy these Indian pharmaceutical stocks, sees 20% upside for one

Published Mon, Jan 10 20226:30 PM ESTUpdated Mon, Jan 10 20227:02 PM EST

Jefferies said it's time to buy these Indian pharmaceutical stocks, one of which has potential gains of nearly 20%. "Indian [contract development and manufacturing organization] companies are seeing significant order flow improvement with strong growth visibility," Jefferies' Abhishek Sharma and Dhawal Khut wrote in a Tuesday note. Contract development and manufacturing organization in the pharmaceutical sector refers to companies that offer services from drug development to manufacturing. While there are many business models in this area, the Jefferies' analysts said they like those where vendors operate in less competitive spaces as well as those backed by proven management. One such company is Gland Pharma , which the analysts said is a "dominant player in generic injectables manufacturing." Jefferies has a "buy" rating on the stock, meaning it sees the shares having at least 15% total return within a 12-month period. The investment bank has a target price of 4,566 Indian rupees (about $61.39) for Gland Pharma, representing 18% upside from its Monday close. "The company has a pristine track record on USFDA audits, and maintaining such compliance for injectables facilities has been a differentiator. Gland Pharma is an injectable specialist and a contract manufacturer; hence, it benefits from economies of scale and is less exposed to generic pricing risk," the analysts said. Another stock that Jefferies has a "buy" rating on is pharma manufacturer Laurus Labs . The analysts said the company has expanded into manufacturing finalized drug products as well as CDMO. It has also started a large capital expenditure cycle. Jefferies has a price target of 628 rupees for Laurus, which represents a 20% gain from its Monday close. "Laurus has created a subsidiary, LSPL, and is building manufacturing facilities that will lend self-sufficiency to the CDMO business going forward. LSPL will have its own 200,000-square-feet R & D facility that will be operational by FY23 and greenfield manufacturing units by FY24," the Jefferies analysts said. Other Indian pharmaceutical stocks that Jefferies likes include Syngene and Piramal Enterprises with price targets of 710 rupees and 3,050 rupees, respectively. "We like Gland and Syngene for their defendable business models and Laurus for runway to growth in the CDMO synthesis business," the analysts said.

A staff member stands besides a desk stocked with medicines and health monitoring equipments inside the temporarily converted Covid-19 coronavirus care centre at the Commonwealth Games stadium in New Delhi on December 22, 2021.

MONEY SHARMA | AFP via Getty Images

Jefferies said it's time to buy these Indian pharmaceutical stocks, one of which has potential gains of nearly 20%.