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Brokerage firm ICICI Securities holds a positive view on the pharmaceutical sector, citing the high possibility of growth revival in Indian formulations on a low base of FY21. It also upgraded players like Divi’s Laboratories (Target price: Rs 4,236), Pfizer (Rs 5,143) and Jubilant Pharmova to ‘Buy’ from ‘Add’.

Shares of Divi’s Laboratories traded 0.29% higher at Rs 3,593.25 in the afternoon trade on Wednesday. Pfizer and Jubilant Pharmova were up 0.24% and 0.43% at Rs 4,475 and Rs 699, respectively.

ICICI Securities believes that the FY22E EBITDA margin would likely be lower than FY21 with the resumption of general and administrative expenses like travelling and marketing. On the other hand, it highlighted that figures are likely to be higher than FY20 levels.

“We prefer companies with strong India business, complex generics pipeline for the US and improving return ratios,” ICICI Securities said. Of late, the BSE Healthcare index has underperformed the benchmark BSE Sensex with a dip of nearly 2% YTD. On the other hand, the 30-share Sensex has gained 5% during the same period.

The brokerage also has a ‘Buy’ call on Cipla, Alkem Laboratories and Abbott India. “Focus on India and branded generic segments along with profitability improvement and high growth visibility to benefit Cipla. On the other hand, Alkem Laboratories to benefit from solid India business, improving margin trajectory, consistent track record of growth outperformance and attractive valuations,” ICICI Securities said in a report.

Shares of Cipla advanced 92% for the financial year ended March 31. Alkem Laboratories also gained nearly 18%, while Abbott India slipped 3% during the year. On the other hand, Neuland Laboratories emerged as top gainer in the list with a rally of 645%. Aarti Drugs (up 460%), Laurus Labs (up 459%) and Suven Pharmaceuticals (up 376%) stood among other majors gainers in the list.