Cipla, Glenmark & Lupin are three pharma stocks that we like: Pankaj Pandey, ICICIdirect.com

In a chat with ET Now, Pankaj Pandey, HoR, ICICIdirect.com, says south-based cement players continue to do better than the north Indian companies.

Edited excerpts:


Have you looked at the results of two companies, one of them is Cipla and the other one is Manappuram Finance?

We have a coverage on Cipla and the results are largely mixed. The bottom line growth is largely on the basis of further income growth while margins are below 20 odd per cent. Within the pharma space, we are quite selective given the fact that the entire space is not performing. Lupin again remains a top pick for us.

Largely there are no regulatory challenges for the company. Though we have not seen a proportionate price appreciation in the stock, besides that, Glenmark Pharma is another stock which we like. The results were quite good and we are quite optimistic on the US growth plus we also see domestic growth of about 13 odd per cent.

Overall, we are expecting a good set of numbers wherein top line growth could be 14 odd per cent and bottom line growth could be far higher. Since the company is already one of the big R&D spenders, we have not taken any commercialisation or monetisation of their R&D pipeline but we still expect this stock to do well, given the fact that it has not done much in the past two years.

Any takeaways or expectations that you would have from Aurobindo Pharma and Lupin considering how stark the underperformance has been from the pharma universe?

For Lupin, we are expecting a good set of numbers and expect overall revenues to grow by 22 odd per cent. The US market has seen a growth of about 41 odd per cent, largely because of new product launches plus the Gavis acquisition. Even the Japanese market is expected to do well for Lupin and that should lead to good bottomline growth. We expect the margins to be in the range of 24 to 25 odd per cent. Probably the entire top line growth may not translate into bottom line growth and that is why we expect a bottom line growth of about 18 odd per cent. Overall, we are expecting decent set of numbers.

There was nothing grand with the ACC numbers. There is a huge concern about the underlying valuations that both Ambuja and ACC are commanding. What explains this liking for cement and especially for ACC and Ambuja?

Largely, for ACC, if you look at though it appears or though it is a large cap company in terms of capacity but your margin profile and return ratios are that of midcap and which is why this company keeps getting multiples of midcap. Ambuja is slightly better off and eventual consolidation would benefit Ambuja more compared to ACC, which is why we have a bias towards Ambuja.

Within cement sector, south appears to be a region with a standout in demand growth especially from Andhra Pradesh and Telangana. All south-based players have been reporting fairly stable set of numbers with expansion in EBITDA per tonne. So we like a company like India Cement wherein we have seen good set of numbers and the south-based players will continue to do well for entire India as well. We need to look at the second half. Till that time, we would expect softer numbers for most of the other players which are largely based in north India.