The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    Can Gland Pharma stock see more upside?

    Synopsis

    A 17%-18% jump was a good opening and the company will benefit from the fact that it has all these good long-term contracts which ensure a certain amount of revenue visibility.

    The completely beaten up sectors like the hotel, leisure, where the stimulus has yet to be provided, are the ones to focus on in the coming week.
    Global sectors -- metals and those related to the commodities -- will continue to do well because they will benefit both from domestic as well as international news flow, says Chakri Lokapriya, CIO & MD, TCG AMC.

    Focus has shifted away from the pharma, IT names towards the auto, PSU banks. Even the midcaps saw a lot of activity in the week gone by. So, there definitely seems to be a shift in terms of sentiment. What is driving interest outside of just the safer stocks?
    Yes, indeed, it has been a very eventful week and a good one at that. This trend will continue for the next several weeks because we will have a stimulus in the US and in the EU. On the back of this, you also have the most important news of the year or probably the decade or the century and that is the vaccine. Now, that would do a number of things for both consumers and the corporates. One of the reasons banks have done well and will continue to do well is because we have a vaccine in sight. This allows you to come up with some kind of peak provisioning of losses for financial services companies, and that is one of the things that the Street has been grappling with. The banks despite their recent run have been underperformers. So, it is peak provisioning in sight which makes it easier to value banks. Second, both the consumer and the corporate will feel more positive and there would be a sentimental lift. There will be some amount of demand reflation. It is already showing up in autos and the other sectors like metals and I think this trend will continue.

    Gland was a muted IPO but the listing was quite okay. An injectable CMO player with world-class capabilities, Gland has also got the fastest growing generics injectables manufacturing, as well as, it is a niche player with a large pie of its revenues coming in from the US geography. What's your take on the stock?
    All these things hold the company in good stead. A 17%-18% jump was a good opening and the company will benefit from the fact that it has all these good long-term contracts which ensure a certain amount of revenue visibility.

    On the flip side, because these are long-term contracts, there would not be much of a margin upside but, on the other hand, you have some kind of downside protection to the company. Secondly, it allows the company to be in the space which is growing very fast. The injectable space will see a huge amount of demand, and a Covid-like pandemic is also helpful for this space. The company’s profitability and growth are very reasonable. It has 45-50% of its revenue coming from a few large clients and that does present some kind of concentration risk. But just the breadth of the business allows the company to continue to do well. I think there is still upside from the current levels for Gland Pharma.

    What are some of the stocks to watch out for?
    Global sectors -- metals and those related to the commodities -- will continue to do well because they will benefit both from domestic as well as international news flow. A strong auto demand and a pick up in construction translate well for the metal companies. As we reach closer to a peak provisioning for banks, they will perform but it is still some time away. Meanwhile, consumer-related sectors, whether it is small-ticket consumer items like the Havells or the Voltas of the world or the bigger ticket auto, are the ones that will start doing well. And the completely beaten up sectors like the hotel, leisure, where the stimulus has yet to be provided, are the ones to focus on in the coming week.
    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Also Read

    4 Comments on this Story

    Sandeep Khanna2 days ago
    When best of proven pharma stock is available at less than this price Abbott@ 15500 , how to justify it.
    Suresh Kamath2 days ago
    GLORIFYING this GLAND Pharma surely NEED be toned down and since CHINESE holding as well as FRAUDSTER Raju of INFAMOUS Satyam MUST be seized of such MONEY and SEBI and ROC should act sooner and NEVER allow such ENEMY Company to BLOOM in the COUNTRY Jai Hind Jai Jawan Jai Sri Ram Vande Mataram
    nitinsai Sai Krishna3 days ago
    investors should be aware of the gland pharma that post IPO the china promoters hold only 58% of the stake , but pharma funds should are always be cautioned
    The Economic Times