Healthcare is one of the largest sectors in India, both in terms of revenue and employment. The industry comprises of segments like hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance, and medical equipment.

The sector has been proliferating on the back of rising coverage, services, increasing expenditure by both public and private players.

The sector is poised to grow at a healthy rate and is likely to increase three-fold to Rs 8.6 trillion by 2022. Because the healthcare expenditure as a percentage of Gross Domestic Product (GDP) is growing, there is a tremendous scope of growth in the sector.

Also, the government is committed to increasing its public health spending to 2.5 percent of the country’s GDP by fiscal 2025 from 1.4% in fiscal 2018.

Following are some of the stocks that may do well over the long-term in the sector –

Healthcare Stocks- At a Glance
Stock Name 52 week high 52 week low Market Cap (Cr) PE Ratio 1 yr Return Current Price
Alembic Pharmaceuticals Ltd. 664.00 435.15 9,518 16.3 -22.0% 504.90
Aurobindo Pharma Ltd. 838.00 536.60 36,899 15.6 -21.2% 629.75
Biocon Ltd. 359.00 211.05 27,906 15.4 -64.9% 232.55
Jubilant Life Sciences Ltd. 898.85 391.05 8,185 14.2 -35.2% 513.90
Dishman Carbogen Amcis Ltd. 290.25 160.55 2,944 14.0 -36.2% 181.85
Suven Life Sciences Ltd. 318.40 182.70 3,520 40.5 -12.1% 275.00
Cadila Healthcare Ltd. 420.00 206.50 24,754 13.4 -41.4% 241.70

1. Alembic Pharma

Alembic Pharmaceuticals Ltd. (APL) is an Indian MNC headquartered in Vadodara, Gujarat. The company manufactures pharmaceutical products, substances, and intermediates.

The company is a leader in macrolides segment of anti-infective drugs in India. The manufacturing facilities are located at Panelav, Karakhadi in Gujarat and Sikkim, India.

Key Information

Market Cap
₹10,414 Cr
EPS(TTM)
₹29.40
Book Value
₹138.16
Face Value
₹2.00
Industry P/E
22.34
P/E
25.24
P/B
4
Div. Yield
0.72%

Why Should You Consider Investing in This Stock?

The company is benefitted with the valsartan opportunity arising out of shortage in the US. Going forward, the growth in international business is likely to moderate in FY20 due to a high base in FY19 and opportunities in critical products (sartan based formulation and API) may reduce.

The company spent a massive amount during FY17-19 towards setting up facilities for manufacturing specialty products. While the capex intensity will reduce going forward, the company is likely to get the benefit from the commercialization of new facilities.

The long-term growth prospects remain lucrative on the back of high-intensity R&D to build robust products pipeline in oncology, injectables, and derma along with new facilities and JVs.

Thus, the company could be considered as an investment from a long-term perspective.

2. Aurobindo Pharma Ltd

Aurobindo Pharma Ltd (APL) is a pharmaceutical company headquartered in Hyderabad.

The company manufactures generic medicines and active pharmaceutical ingredients in areas like antibiotics, antiretrovirals, cardiovascular products, central nervous system products, gastroenterological, and anti-allergic.

Key Information

Market Cap
₹45,092 Cr
EPS(TTM)
₹39.39
Book Value
₹233.54
Face Value
₹1.00
Industry P/E
22.34
P/E
18.61
P/B
3.3
Div. Yield
0.32%

Why Should You Consider Investing in This Stock?

The company’s revenue and earning drivers will be the acquired portfolio of Sandoz and Spectrum pharma.

The duo is likely to contribute massively at the EBITDA level. The integration of Sandoz oral and dermatology business is expected to contribute to earnings immediately. Also, the Sandoz portfolio is likely to contribute from the third quarter of fiscal 2020.

With a long-term horizon, the company is continuing to build its capabilities in alternate dosage forms like respiratory inhalers, peptides, vaccines, and depot injectables. Thus, an investor can look at the scrip from medium to long-term horizon.

3. Biocon Ltd

Biocon Ltd (Biocon) is an Indian biopharmaceutical company that manufactures generic active pharmaceutical ingredients (APIs).

The products are sold in over 120 countries across the globe, including the developed markets of the United States and Europe.

In research services, Syngene International Ltd, a publicly listed subsidiary of Biocon, integrates end-to-end drug discovery and development services.

Market Cap
₹33,084 Cr
EPS(TTM)
₹15.09
Book Value
₹101.63
Face Value
₹5.00
Industry P/E
22.34
P/E
88.84
P/B
5.43
Div. Yield
0.18%

Why Should You Consider Investing in This Stock?

Biocon has reported strong performance in the last quarter of fiscal 2019. The company’s revenue was up in double-digit from both the biologics business and research services.

The EBITDA margin remained healthy and expanded by multiple percentage points. The company is likely to maintain its margins going forward despite high investment towards R&D as well as capex.

Thus, the stock remains favorable for medium-term to long-term duration.

4. Granules India Ltd

Granules India Ltd (GIL) is an Indian pharmaceutical company based in Hyderabad. The company manufactures tablets, Pharmaceutical Formulation Intermediates (PFIs), and active pharmaceutical ingredients (APIs) that are distributed to over 74 countries.Why should you consider investing in the stock?

Key Information

Market Cap ₹2,822 Cr
EPS(TTM) ₹7.58
Book Value ₹57.95
Face Value ₹1.00
Industry P/E 22.34
P/E 21.25
P/B 1.92
Div. Yield 0.90%

Granules have achieved a significant ramp-up in revenue on the back of expanded capacity. However, the margins have remained subdued on the back of rising cost of raw material, lack of US approvals for new API plants.

Going forward with a better business mix and moderation in raw material price will enable recovery in margins.

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Also, the growth in revenue post the phasing out of capex will lead to health free cash flow that will eventually result in easing the debt burden.

Thus, the stock looks promising from a medium to long-term horizon.

5.Jubilant Life Sciences Ltd

Jubilant Life Sciences Ltd (JLSL) is an integrated global pharmaceutical and life sciences company that is engaged in manufacturing of APIs, solid dosage formulations, radiopharmaceuticals, allergy therapy products and contract manufacturing of sterile injectables and non-sterile products.

The company is also involved in the manufacturing of specialty intermediates, nutritional products, and life science chemicals.

Key Information

Market Cap
₹10,170 Cr
EPS(TTM)
₹52.02
Book Value
₹305.56
Face Value
₹1.00
Industry P/E
24.92
P/E
15.47
P/B
2.09
Div. Yield
0.47%

Why Should You Consider Investing in This Stock?

RubyFill continues to gain market share, but the company is currently incurring costs to develop the market for future revenue and higher margins. Also, Triad is likely to attain breakeven in FY21.

Going forward, the pharma business is likely to remain stable with RubyFill gaining market share. Also, the improving situation for Vitamin B3 and CMO’s additional capacities is expected to aid the company’s performance.

Thus, the stock remains a favorite pick in the sector with medium to long-term horizon.

6. Dishman Carbogen Amcis Ltd.

Dishman Carbogen Amcis Ltd (Dishman) is a multinational company that manufactures active ingredients.
Carbogen Amcis, acquired by Dishman in August 2006, is a leading service provider of drug development and commercialization services.

The services include contract chemical process research and development to the supply of APIs for preclinical studies, clinical trials, and commercial use.

Key Information

Market Cap ₹3,489 Cr
EPS(TTM) ₹11.53
Book Value ₹333.99
Face Value ₹2.00
Industry P/E 22.34
P/E 22.57
P/B 0.65
Div. Yield NA

Why Should You Consider Investing in This Stock?

Dishman is the only listed Indian company that manufactures complex commercial APIs for innovators in small to large scale.

The scrip is a structural, long-term story with growing visibility on the commercial pipeline, stable base of pre-clinical/phase I molecules, and improving business fundamentals. Thus, the stock can be looked at from a long-term horizon.

7.Suven Life Sciences Ltd.

Suven Life Sciences is a biopharmaceutical company involved in discovering, developing, and commercializing pharmaceutical products.

Key Information

Market Cap
₹3,268 Cr
EPS(TTM)
₹9.72
Book Value
₹60.29
Face Value
₹1.00
Industry P/E
22.34
P/E
26.42
P/B
4.26
Div. Yield
0.58%

Why Should You Consider Investing in This Stock?

The company is an expert in the business of Contract Research And Manufacturing Services (CRAMS). Company’s high emphasis on R&D is likely to provide long-term stability, whereas its entry in the formulations segment will bring in the margins over time.

The company’s CRAMS is expected to provide steady revenue growth on the back of its 116 active projects, and a promising new chemical entity pipeline of 13 molecules should add to the momentum.

Company’s SUV 502 used for mild Alzheimer’ is undergoing Phase II study, and if successful, it can generate upfront cash flows.

Thus, we expect the company’s earnings to improve over time; thereby, we remain bullish on the stock from a medium to long-term horizon.

8. Cadila Healthcare Ltd.

Cadila Healthcare Ltd (Cadila) is an Ahmedabad based pharmaceutical company that is engaged in the manufacturing of generic drugs.

Market Cap
₹30,641 Cr
EPS(TTM)
₹19.34
Book Value
₹92.04
Face Value
₹1.00
Industry P/E
22.34
P/E
17.26
P/B
3.25
Div. Yield
1.17%

Why Should You Consider Investing in This Stock?

Company’s revenue was up in double digits, supported by the addition of the consumer wellness business. However, the EBITDA margins contracted by a few percentage points owing to change in product mix and rising other expenses as a percent of sales.

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The company is likely to maintain its revenue, despite higher base, on the back of 35-40 launches (excluding launch from Moraiya). Also, the disruption from Moraiya site based on inventory availability is likely to reduce leading to a gradual ramp-up in production post implementation of CAPA.

Thus, based on rationalization and productivity improvement initiatives, one can look to invest in the scrip with a long-term view.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww