Q3 Result Preview: The favorable trend seen by Indian Pharma companies on earnings growth during the first half of FY24 may continue during the December quarter too. Two key reasons for the same are continued strong performance of Indian companies in the US markets and healthy growth momentum in the domestic arena.
The US performance of Indian Pharma companies had remained strong led by large product launches. The competitive intensity in the US markets that had been leading to pricing pressure on the base business has also, reduced in the past few quarters.
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US Business’ to drive growth
The Flu season has not been strong this year in the US and hence the companies as Lupin , Zydus Lifesciences that reap maximum benefits, may not see the Flu led gains this year. Nevertheless their growth momentum may still remain strong. The product launch momentum remains strong. Most of the Indian companies thereby will benefit from large product launches that have taken place or are lined up this year.
Analysts at Jefferies India Pvt Ltd expect the current benign US pricing environment to continue and believe most of their coverage firms will clock sequential sales growth in the quarter. They have factored highest sequential growth for Sun Pharma ( up 8% sequentially) as the company will benefit on seasonality of specialty products , traction in recently launched generic Vyvanse and surge in sales of Albuterol and Ipratropium combination, as per Jefferies Estimates.
Lupin will also see 4% sequential growth and will gains from sales of generic Spiriva (respiratory product) sales and HIV treatment drug Darunavir exclusivity, as per Jefferies estimates
Dr Reddy’s Laboratories may see 2% sequential sales growth mainly led higher generic Revlimid sales while Zydus sales are expected to rise 3% sequentially driven by Indomethacin launch
Strong Domestic growth
The growth in the Indian pharma market too may remain robust. The analysts at Jefferies have built in 10-12% YoY growth for most of companies under their coverage, with the only exception of Lupin and Dr Reddy’s. They expect highest growth rate for Torrent pharma (up16% YoY) led by Curatio acquisition and for Cipla, they estimate will see domestic sales rise 12% YoY. The lowest growth may be for Lupin (up 8% YoY) and Dr Reddy’s ( up 6% YoY), in their coverage.
Analyst expect India business to witness some gross margin improvement on benign RM costs and seasonality impacts too.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Published: 18 Jan 2024, 06:30 PM IST