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IT & Pharma Sector Short Analysis

IT & Pharma Sector Short Analysis

Published on 04 May 2020 Views 192 Comments 0

IT & Pharma Sector Short Analysis

About IT And Pharma Industry

Pharma sector deals with the generic drug market with competitive advantages to various pharmaceutical companies while the IT sector deals with technology, electronics and communication involving the prospect of future growth of the country into a developed nation.

Make An Informed Investment Decision With IT And Pharma Stocks Analysis

IT and pharma industry – Key Ratios: Fundamental Analysis Of IT Pharma Share Price

The following data offers a detailed insight into the IT Pharma performance, providing the figures of various ratios & other fundamentals.

INFORMATION TECHNOLOGY SECTOR


  • Broad-based weakness across client industries is a revenue challenge.     

  • Post COVID-19 some industries such as Travel, Hospitality, Energy, Retail have been immediately impacted and demand weakened. BFS, Media, Manufacturing are likely derivative victims of the current environment, due to factors such as near-0 interest rates (BFS), weak consumer sentiment (Manufacturing)

  • Given the broad-based nature of slowdown, there remain doubts if recovery can be V-shaped, which is the expectation across many prominent IT companies for now.

Headwinds

  • Growth in new technologies is putting pressure on traditional application management deals.

As the world economy enters recession post COVID-19, IT budgets could be severely impacted across industries and recovery

  • May be slow and gradual, hurting volumes as well as pricing.

  • Unemployment rates are likely to hit 15-20% in the US, which once again will fuel fears of protectionism; especially in the election year. IT companies may need to up their hiring of locals further.

Competition in increasing in the digital space along with some further shift in business towards captives, European based

  • Vendors and consulting firms.

Tailwinds

  • Disruption caused by COVID-19 should accelerate the demand for cloud-based solutions and IT Applications modernization.

  • Companies with higher digital /consulting and engineering capabilities will gain market share.

Strengthening of the US Dollar is timely, as it cushions the IT Services players against margin headwinds from low revenue

  • Momentum and weak pricing environment.

  • Companies continue to generate significant free cash flow. Efficient capital returns through buybacks and dividend pay-outs to support downside in stocks especially at current valuations.

PHARMACEUTICAL SECTOR

  • US generics business has become stable after period of high price erosion. Indian domestic branded business, APIs and US complex generics and specialty remain attractive. Major Indian pharma companies are now focussing on fewer opportunities, this would improve odds of success and reduce stress on the cash flows.

  • Positive on the sector as the uncertainties in the sector have reduced and growth is improving.

HEADWINDS

  • USFDA has become more strict in ensuring compliance to manufacturing standards, this is leading to higher chances of adverse regulatory action on Indian companies.

  • Competition is US market is now structurally high due to increase in number of companies getting ANDA approvals.

  • Government push to promote generic-generic drugs can reduce overall market size for branded generics.


TAILWINDS

  • Faster approval by USFDA will lead to more opportunities for Indian companies in low competition products. Particularly helpful for players  which have a small US portfolio.

  • Many companies want to have one more source other than China from API. This is long term and sizeable opportunity.

  • Commercialization of AND pipeline acquired through acquisitions. Start of commercialization of the complex/branded portfolio in the US market.

  • After muted growth in domestic market for some time, growth is recovering. We expect that domestic pharma market growth would be in low double digits in the medium term.


Invest Yadnya’s Other Resources For Detailed Stock Analysis

Our website offers multiple resources on HDFC Bank. You can check out our stock articles- Gland pharma IPO Review, Top 14 pharma Companies Quantitative Analysis & many more. These articles will offer a detailed review of HDFC Bank stock.

Make all your investment decisions with us, as we offer quality financial advice. For more of such quality content, check out Invest Yadnya.
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