Top 8 Pharma Stocks in the Indian Stock Market (Sensex & Nifty)

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Top 8 Pharma Stocks in the Indian Stock Market (Sensex & Nifty)

Pharma Sector Analysis in India (Listed Companies on Stock Exchange)

This analysis is done with the only purpose of screening out good companies. Analysis done is completely on quantitative basis. No suggestions are being made to directly go and invest in the top scoring companies of this analysis.

Let’s study some Pharma companies, we have selected the following companies for study and analysis (the companies are selected on the basis of market cap, the top 8 companies of that sector according to market cap): –

  1. Sun Pharma
  2. Dr. Reddys
  3. Aurobindo Pharma
  4. Cipla
  5. Divis Lab
  6. Lupin Pharmaceuticals
  7. Biocon
  8. Cadila Healthcare
Sr. No.Company NameMarket Cap (Rs. Crore)
1Sun Pharma103,842
2Dr. Reddys43,203
3Aurobindo Pharma42,501
4Cipla41,362
5Divis Lab38,721
6Lupin37,495
7Biocon37,101
8Cadila Healthcare35,282

The top 100 companies according to the market capitalization are called as the large cap companies. Companies from 101 to 250 (based on market capitalization) are the mid-cap companies and the rest, that is above 250 are the small cap companies.

All the companies here are large cap companies.

The analysis of these companies is going to be based on the following parameters. They are as follows: –

  1. Price-to-Earnings (PE) Ratio
  2. What is ROCE (Return on Capital Employed)
  3. What is ROE (Retuen on Equity)
  4. Debt to Equity Ratio (DE Ratio)
  5. 5 Years Sales Growth
  6. 5 Years Net Profit Growth

These parameters play an important role in the analysis of any company. This does not mean that one should be dependent only on these, but these parameters are crucial for initial screening.

First, we have given the companies their ranks and then accordingly we have assigned scores to those companies from 1 to 8, where 1 being the least and 8 being highest score. (total number of companies taken here are 8, that’s why the mentioned scoring card)

PE Ratio

Sr. No.Company NamePE RatioRankScore
1Sun Pharma28.3445
2Dr. Reddys27.5136
3Aurobindo Pharma19.2327
4Cipla28.3954
5Divis Lab33.7172
6Lupin30.4663
7Biocon68.9181
8Cadila Healthcare17.5118

PE ratio is nothing but what price an investor is paying for 1 rupee of earning.

The company which has the highest PE ratio has been given number 8th rank and the company which has the lowest PE ratio has been given number 1st rank.

But the company which has the highest PE ratio has been given the lowest score.

Biocon has the highest PE ratio and thus got number 8th rank and scored 1. Cadila Healthcare has the lowest PE ratio and thus scored number 1st rank and a score of 8.

ROCE

Sr. No.Company NameROCERankScore
1Sun Pharma10.41%45
2Dr. Reddys7.75%81
3Aurobindo Pharma22.85%18
4Cipla9.64%63
5Divis Lab21.37%27
6Lupin10.21%54
7Biocon8.41%72
8Cadila Healthcare18.28%36

The company which has the highest ROCE has the highest rank and has also been given the highest points. And the company which has the lowest ROCE has the lowest rank and has also been given the lowest score.

Aurobindo Pharma has the number 1 rank and scored 8 points. And Dr. Reddys has the lowest rank (8th) and scored 1 point.

ROE

Sr. No.Company NameROERankScore
1Sun Pharma7.70%54
2Dr. Reddys7.19%63
3Aurobindo Pharma23.13%18
4Cipla10.06%45
5Divis Lab15.34%36
6Lupin2.08%81
7Biocon6.56%72
8Cadila Healthcare22.64%27

ROE has been analyzed on the same basis as ROCE.

The company which has the highest ROE has the highest rank and has also been given the highest points. And the company which has the lowest ROE has the lowest rank and has also been given the lowest score.

Here too, Aurobindo Pharma ranked 1st as it had the highest ROE and thus scored 8. But here, Lupin ranked 8th as it had the lowest ROE and thus scored 1.

DE Ratio

Sr. No.Company NameDE RatioRankScore
1Sun Pharma0.2777
2Dr. Reddys0.455
3Aurobindo Pharma0.4144
4Cipla0.2966
5Divis Lab0.0188
6Lupin0.5322
7Biocon0.4433
8Cadila Healthcare0.6211

A lower DE ratio means that the company doesn’t require debt for its growth or for its working capital. That is the debt component of that company is very low and it can run its operations smoothly using the existing equity or reserves & surplus.

The company which has the highest DE ratio has the least score and the company with lowest DE ratio has the highest score.

Divis Lab has the lowest DE ratio and has thus scored 8. Cadila Healthcare has the highest DE ratio and has thus scored 1.

 5 Years Growths

Sr. No.Company Name5 Years Sales GrowthRankScore
1Sun Pharma18.94%27
2Dr. Reddys3.83%81
3Aurobindo Pharma23.02%18
4Cipla12.85%45
5Divis Lab12.38%54
6Lupin10.38%72
7Biocon10.66%63
8Cadila Healthcare13.37%36
Sr. No.Company Name5 Years Net Profit GrowthRankScore
1Sun Pharma-3.09%63
2Dr. Reddys-10.04%72
3Aurobindo Pharma52.08%18
4Cipla-2.45%54
5Divis Lab7.36%36
6Lupin-26.63%81
7Biocon-0.87%45
8Cadila Healthcare22.02%27

The company with the highest 5 Year CAGR in Sales and Net Profit get the highest rank and thus gets the highest score. And Vice-Versa.

Aurobindo Pharma has scored 8 in both, as it has the highest 5 years sales & net profit growth. And Dr. Reddys has scored 1 in 5 Year Sales Growth and Lupin has scored 1 in 5 Year Net Profit Growth, as they have the lowest 5 years sales & net profit growth.

Final Standings

RankCompany NameFinal Score
1Aurobindo Pharma43
2Cadila Healthcare35
3Divis Lab33
4Sun Pharma31
5Cipla27
6Dr. Reddys18
7Biocon16
8Lupin13

Aurobindo Pharma is on the 1st position with 43 points, Cadila Healthcare on 2nd with 35 points, Divis Lab on 3rd with 33 points and Lupin is on the last position, that is 8th with just 13 points.

The point here is to focus on the fundamentals of the company. Here, we have analyzed the company based on their current fundamentals. Also, the qualitative analysis of these companies will provide with a better outlook towards them

And quantitative analysis along with qualitative analysis will give a better understanding of which company is worth investing from here on.

Note:

  • We are not, in any case, suggesting buying stocks of any of the companies mentioned above. We have just provided a study on these companies.
  • All the data used is of Trailing Twelve Month (TTM)

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