HDFC Securities, a brokerage firm, initiated coverage in which it shared the rating on the small-cap pharma stocks. During the coverage, it provides the buy rating to the investors and gives a buying call on the target price. It is not the first time HDFC securities have been bullish on small-cap stocks. Previously, it shared the buying rating on different categories of small-cap shares, including real estate, technology, and more.
HDFC securities itself is an unlisted company and subsidiary of HDFC bank. HDFC securities unlisted shares are traded in the Pre-IPO market, and this time it initiated coverage on the small-cap company like Marksans Pharma along with a target price. Read the blog to know why HDFC Securities is bullish on small-cap Pharma stocks.
What HDFC Securities Initiated in its Coverage of Pharma Stocks?
In a recent interview, Parag Thakkar, Head of Institutional Sales of HDFC Securities, said, “Exporters like Pharma and IT will benefit from a strong dollar.” He also shared his views on small-cap pharma stocks like Aurobindo and gave a clear sign that such stocks will show a 20-25 percent growth in the next few years. In November 2022, HDFC securities shared the buy rating on various pharma stocks with a bull target of Rs 66 in its coverage.
In the recent coverage, a brokerage firm expects that the small-cap pharma stocks, including Marksans Pharma, will show exceptional growth and deliver a 10 per cent upside in a base case in the next three quarters. In its recent report, HDFC Securities stated, “The optimism emerges from the drugmaker’s focus on regulated markets of the US and UK while concentrating on high-margin soft gels and over-the-counter products.”
The brokerage firm has various views regarding its bullish on small-cap Pharma shares, including the expected target price and total growth in the next 5-10 years.
Reasons Why HDFC Securities Provides Buying Rating On Small Cap Pharma Stocks
HDFC Securities is a reputed financial service and brokerage firm that shares the signs and buying data on various stocks. It is never easy for investors to decide to invest in stocks without solid reasons. You might be curious why HDFC securities are bullish on small-cap pharma shares. Here are the possible reasons behind it:
1- Demand In OTC Segment
Over-The-Counter (OTC) products of small-cap pharmaceutical companies remain in huge demand in the US and UK markets. HDFC Securities believes that drugmakers focus on these regulated markets and ensure the manufacturing of products that meet the market demands and provide high margins. There is also a strong sign that the pharma stocks like Marksans Pharma will likely see a higher price in the next 2-3 Quarters due to its stable demand with minimal price erosion.
2- Improvement In Margin
Various small-cap pharma stocks have shown substantial growth in the past few years, and it is due to the well-managed strategy of the companies and the efforts they made in maintaining the balance sheet. HDFC securities stated that many pharmaceutical companies support inorganic growth and show an impressive Compound Annual Growth Rate (CAGR) of 17% in the US, UK, New Zealand, and Australian markets. HDFC Securities believes that the CAGR of the small-cap Pharma Companies will touch 18-20% in the next two years.
3- Normal Operating Expenses
According to HDFC Securities, small-cap pharmaceutical companies have normal operating expenses that are expected to improve. The brokerage firm advises investors to buy small-cap pharma stocks in the band of Rs 68.80 to 69.50 with a bull case target of Rs 83.60 over the next two or three quarters.
Apart from this, HDFC securities also considered the improved balanced sheets with equivalent cash of Rs 417 crore in December 2022. There is a precise estimate that the normal operating expenses will help the small-cap pharma stocks to grow in the market in the next five years.
Small-cap companies have shown immense growth in the past few years. The majority of Pharmaceuticals and other categories of companies are not listed on the stock market. HDFC securities unlisted shares are openly traded in the Pre-Stock market and let investors buy or sell its stocks. The unlisted shares are considered the best investment option due to less risk and more diversification options. HDFC securities suggested PharmEasy as the prominent pharma stock that will show an excellent CAGR in the next few quarters.
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