New tailwinds emerge! 5 midcap pharma stocks with upside potential of up to 37%

It is not very common to see tailwinds emerging for an industry at a time when it is ideal to own stocks from that space. But in the case of pharmaceutical companies, tailwinds have emerged at a time when valuations of the overall market are expensive and it makes sense to look at pharma stocks as they tend to act as defensive stocks in volatile times with bearish bias. However they should not be clubbed together; each company has its own operating matrix. A company which has a strong domestic brand in the generic drugs segment, will not be getting impacted by what is happening in the US pharma market or what USFDA does. But yes, if it might be impacted by what happens in China.

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Pharma as a sector, both in terms of business and stocks price performance has been under pressure for a very long time. Some time USFDA issues, at other instances of pricing pressure in US markets have been troubling the sector. However, recently some tailwinds have emerged both for the companies focussing on domestic pharma and also the ones focussed on the US generic market. The list is based on upside estimated by the analysts, with the highest potential stock coming on the top of the list.

As the markets get jittery, select pharma stocks are back in focus. This tends to happen in volatile markets. Some of them are mid-sized Indian pharma companies which are not hit by pricing pressure of the US generic market and other issues which large pharma companies are facing. The list is based on upside estimated by the analysts, with the highest potential stock coming on the top of the list.

Except for a pocket in which demand for covid drugs led to sharp surge in pharma stocks, the pharma sector had been under pressure for a long time. After a long phase of consolidation, in which some companies have implemented change in their business model, are pharma stocks close to breakout ? Stock Reports Plus, powered by Refinitiv, is a comprehensive research report that evaluates five key components of 4,000+ listed stocks - earnings, fundamentals, relative valuation, risk and price momentum to generate standardized scores.

Capital good companies had faced tough times for many years. Given the fact that hardly any capacity buildup was taking place in any industry, a number had to change their product portfolio and had to live with very low margins. But all the efforts have now started to show some results. Given the performance of the stock, a large majority of these stocks have hold recommendations from the analysts.

Market has a habit of ignoring all the developments for some time and then one day suddenly getting up to the fact that there is something wrong. Probably what we have seen in the last two weeks in the markets is the same thing, a sudden realization that there are issues like rising inflation leading to higher US rates, geopolitical tension and of course on the domestic front, high valuations. In the last quarter of the current financial year, it is time to take a step back, think and then make a decision both when buying and selling any stock. These selected stocks depict a strong upward trajectory in their overall average score. This implies that there has been a significant improvement in their market outlook in the given time frame.

Every business has its own capital requirement matrix and this is what makes them prone to risks of interest rate cycle. Of all the stocks, which our algorithms come up with, we took companies from three sectors. On the list, there is one of the biggest wealth creators from the specialty chemical space. ET screener powered by Refinitiv’s Stock Report Plus lists stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .

Recently, a promoter of a tyre company in a lighter vein mentioned that one of the parts which ICE vehicles and Electric vehicles have in common is tyres. While it might appear to be an obvious statement , over the years, if one looks at the way tyre stocks have performed it has been much better than what it used to be, the cyclicality has gone away and there has been a re-rating. Now if tyre stocks are doing well then the companies which are supplying raw material to tyre companies are also witnessing tail winds. These are B2B players which are into manufacturing carbon black and because they are not consumer facing businesses, these companies don't come into the limelight even when they are doing well.