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Pharmaceuticals
• We expect our coverage universe to maintain growth momentum during Q3. The sustained growth is driven by new
product introductions and higher penetration in the domestic market and regulated markets. We also expect that
CRAMS players shall report better performance, Dishman Pharma in particular. We also expect improving growth
visibility from some of the rest of the world (Row) markets
• Our industry checks suggest dissipating concerns over inventory destocking and delay in receivables. However the
expansion of field force and reorganized /added SBU's by some of the players will lead to near term margin pressures.
• We expect Opto Circuits & Ipca Labs to exhibit buoyant revenue and operating profit growth
• We expect continued sector outperformance backed by positive news flow ‐ Niche ANDA launches, increasing interest
evinced by Big Pharma companies in emerging markets and strong earnings growth visibility. These factors would
continue to support premium valuations awarded to Indian pharma stocks
Pharmaceuticals – Top Picks
Lupin Labs
• Strong operating performance largely driven by robust growth momentum in US, Europe, Japan and India coupled with
favorable product mix
• Medium‐term prospects of branded franchises in the US remain robust on the back of strong growth in Antara & Suprax
• ‘Oral Contraceptives’ launches in US planned for Q3FY12, will aid long term revenue visibility
• We expect the revenues to register 19% growth and the finished dosages business to grow at 27% over FY10‐FY12E
• We recommend “Accumulate” with target price of Rs. 492 (21x FY12E EPS)
Cadila Healthcare
• Thrust on export formulations (US, EU) and contract manufacturing (JV’s – Hospira/ Nycomed), well complemented with
a strong domestic franchise
• Abbott deal for supply of 24 branded generics (scope for additional 40 products) in emerging markets adds to revenue
growth momentum
• Potential Out‐licensing deals currently in advanced stages of its NME pipeline
• We recommend “Accumulate” with target price of Rs. 808 (21x FY12E EPS)
IPCA Laboratories
• Optimal business mix of branded formulations and generics well diversified geographically
• We expect export formulations to register 29% growth over FY10‐FY12E driven by aggressive dossier filings, entry in
new markets and increasing contribution from institutional based sales
• Traction in US generics, post USFDA accreditation of Indore facility and new API supply contracts reinforce growth
potential
• Increasing proportion of specialty lifestyle segments in domestic formulation portfolio ensures higher profitability
• We recommend “Accumulate” with target price of Rs. 343 (14x FY12E EPS)
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