Are pharma stocks attractive now? BNP Paribas recommends these shares to buy

“We believe the Indian Healthcare is on a long-term structural growth path. We expect Hospitals and Diagnostics segments to see double-digit revenue CAGR in the non-Covid business over FY23-25, driven by network expansion, rising healthcare awareness, people’s improving ability to afford healthcare services and a high disease burden,” it said.

Its top stock picks are Sun Pharma and JB Chemicals and Pharmaceuticals (JBCP) in Pharma and Dr Lal Pathlabs and Fortis Healthcare in Healthcare services.

“We think Hospital firms are well positioned to deliver double-digit revenue growth on improving occupancy, a steady rise in ARPOB and bed additions. EBITDA margin has improved in the post-Covid era due to higher ARPOB and rationalized costs, which we expect to continue. Diagnostics revenue growth was disappointing for the last 3-4 quarters due to a slower volume pick up and likely higher competition. But we remain positive on volume-growth recovery and believe the increased competition is unlikely to structurally dent incumbents’ growth outlook, and hence we see a buying opportunity here,” the note stated.

Top healthcare, pharma stocks to buy –

Dr Lal Pathlabs Buy (Target price: ₹2,500)

Metropolis Healthcare Buy (TP: ₹1,732)

Fortis Healthcare Buy (TP: ₹352)

JB Chemicals and Pharmaceuticals Buy (TP: ₹2,442)

Sun Pharmaceutical Industries Buy (TP: ₹1,200)

Aurobindo Pharma Buy (TP: ₹575)

Torrent Pharmaceuticals Buy ( TP: ₹1,800)

Apollo Hospitals Buy (TP: ₹5,074)

Divi’s Laboratories Buy (TP: ₹3,245)

Dr Reddy’s Laboratories Buy (TP: ₹4,855)

Cipla Hold (TP: ₹1,020)

Zydus Lifesciences Hold (TP: ₹476)

Lupin Reduce (TP: ₹584)

Key risks to its positive view, as per BNP Paribas, are: 1) Regulatory hurdles such as adverse FDA ratings and price caps; and 2) escalation in raw-material inflation.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.