Zydus Lifesciences, Granules India offer growth opportunities over next 3-5 years: Shanika Capital

Shanika Capital Advisors’ Managing Partner Anmol Ganjoo sees growth opportunities in Zydus Lifesciences and Granules India, identifying the two companies as potential winners in the pharmaceutical sector.

While Zydus Lifesciences stands out in the largecap space, Granules India is among his preferred picks in the mid- and small-cap segment, with several growth drivers likely to play out over the next three to five years.

On Granules India, Ganjoo acknowledged concerns surrounding the US FDA warning letter for its Gagillapur facility. He said the facility operates at around 75% capacity utilisation, while incremental filings, including high-value products, are also being undertaken from its Virginia and Genome Valley facilities.

He believes the regulatory concerns need to be assessed against their actual earnings impact, rather than triggering an immediate negative reaction.

Ganjoo also sees potential in Glenmark Pharmaceuticals, supported by its core earnings and research pipeline. He believes companies with research opportunities that are not fully reflected in their valuations could deliver additional upside.

Speaking about the sector outlook, Ganjoo said pharmaceutical companies that made smart capital allocation decisions during the industry’s subdued phase are now benefiting from improving earnings and valuations. He believes the next set of winners will be companies investing in areas where earnings growth is yet to fully materialise.

The shift in global supply chains, with companies looking to reduce their dependence on China, has also created opportunities for Indian pharmaceutical companies, particularly in the contract development and manufacturing organisation (CDMO) segment.

However, Ganjoo said investors should distinguish between companies where stock price gains are supported by earnings growth and those where valuations have moved ahead of fundamentals. He cited Divi’s Laboratories, Glenmark Pharmaceuticals and Aurobindo Pharma as examples where earnings growth has supported stock performance.

“Wherever you keep getting the conviction that earnings momentum is here to stay, there is a case for continuous multiple re-rating,” he said.

Overall, he expects capital allocation, earnings visibility and investments in future growth areas to remain key factors in identifying pharmaceutical stocks that can outperform over the coming years.

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Shanika Capital’s Anmol Ganjoo sees Zydus Lifesciences, Granules India among potential pharma winner

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