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India Equity Research Reports, IPO and Stock News
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We expect Dr. Reddy’s (DRRD) and Cadila Healthcare (Cadila), among large
caps, to report strong numbers, while in mid caps, Aurobindo Pharma
(ARBP) and IPCA Laboratories (IPCA) will have strong traction. Ranbaxy
(RBXY), Lupin (LPC) and Sun Pharmaceuticals (SUNP), among large caps,
will have weak operating performance in the quarter, while in mid caps,
Unichem is likely to report lower numbers.
Steady revenue growth during Q4FY11
We expect pharma universe to report steady revenue growth of 10% Y-o-Y (flat
Q-o-Q) during Q4FY11, with positive impact from consolidation of Taro (36% Yo-
Y in SUNP). Cadila will outperform peers in the large-cap space, with strong
growth of 27% Y-o-Y. In mid caps, growth will remain robust (20-22%) for most
peers like Torrent, IPCA, and ARBP, led by strong performance in branded
generics and ramp-up from new capacities. Among large caps, growth in RBXY
and LPC could be impacted from higher exclusivity sales in US generics in
Q4FY10. RBXY is likely to report de-growth of 16% Y-o-Y, from ~USD 180 mn of
sales from Valtrex in Q1CY10, while LPC could see impact from Lotrel price
erosion and lower Suprax sales. Excluding RBXY and SUNP, revenue growth is
16% Y-o-Y during the quarter.
Higher sales mix (branded generics) to positively impact margins
EBIDTA (adj. for SUNP, RBXY) could grow 18% Y-o-Y (40bps expansion in
EBIDTA margins), driven by higher contribution from branded generics business
(Cipla, Cadila) and niche product approvals in US (41% Y-o-Y growth in DRRD).
Ramp-up in SEZ revenues will positively impact operating margins of ARBP
(150bps Y-o-Y). Including SUNP and RBXY, EBITDA growth for the quarter is
likely to decline 11% Y-o-Y (520bps contraction in EBITDA margins, led by of
one-off impact from higher margins from Valtrex (RBXY) and full integration of
Taro (SUNP) that has lower EBITDA margins). Excluding Taro, SUNP’s margin is
expected to decline due to higher fixed costs in Caraco.
Strong earnings growth, ex Sun Pharma and Ranbaxy
We expect relatively higher growth in earnings during the quarter. Excluding
RBXY and SUNP, adjusted PAT is likely to grow 17% Y-o-Y for the quarter, led by
strong earnings growth in DRRD (49% Y-o-Y), ARBP (43% Y-o-Y), and Cadila
(23% Y-o-Y). However, lower growth and higher fixed cost will lead to decline in
earnings for RBXY (-61% Y-o-Y), Unichem (-25% Y-o-Y) and SUNP (-21% Y-o-
Y), resulting in 15% Y-o-Y decline in PAT of the pharma universe.
Outlook: Strong visibility in growth; margin pressures to recede
We expect strong revenue visibility for FY12, with double-digit growth in
domestic formulations and ROW markets and upsides in US generics from USD
35 bn patent expiries in FY12. Further, investments in field force and capacities
during FY11 are likely to consolidate and will result in higher growth over
H2FY12; however, performance could vary across companies. Pharma universe
is currently trading at 17x FY12E earnings, relative premium of 11% to Sensex,
which likely expands during market consolidation. Hence, we remain focused on
specific stock performance. DRRD and LPC are our top picks in large caps, and
TRP our preferred pick in mid caps.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We expect Dr. Reddy’s (DRRD) and Cadila Healthcare (Cadila), among large
caps, to report strong numbers, while in mid caps, Aurobindo Pharma
(ARBP) and IPCA Laboratories (IPCA) will have strong traction. Ranbaxy
(RBXY), Lupin (LPC) and Sun Pharmaceuticals (SUNP), among large caps,
will have weak operating performance in the quarter, while in mid caps,
Unichem is likely to report lower numbers.
Steady revenue growth during Q4FY11
We expect pharma universe to report steady revenue growth of 10% Y-o-Y (flat
Q-o-Q) during Q4FY11, with positive impact from consolidation of Taro (36% Yo-
Y in SUNP). Cadila will outperform peers in the large-cap space, with strong
growth of 27% Y-o-Y. In mid caps, growth will remain robust (20-22%) for most
peers like Torrent, IPCA, and ARBP, led by strong performance in branded
generics and ramp-up from new capacities. Among large caps, growth in RBXY
and LPC could be impacted from higher exclusivity sales in US generics in
Q4FY10. RBXY is likely to report de-growth of 16% Y-o-Y, from ~USD 180 mn of
sales from Valtrex in Q1CY10, while LPC could see impact from Lotrel price
erosion and lower Suprax sales. Excluding RBXY and SUNP, revenue growth is
16% Y-o-Y during the quarter.
Higher sales mix (branded generics) to positively impact margins
EBIDTA (adj. for SUNP, RBXY) could grow 18% Y-o-Y (40bps expansion in
EBIDTA margins), driven by higher contribution from branded generics business
(Cipla, Cadila) and niche product approvals in US (41% Y-o-Y growth in DRRD).
Ramp-up in SEZ revenues will positively impact operating margins of ARBP
(150bps Y-o-Y). Including SUNP and RBXY, EBITDA growth for the quarter is
likely to decline 11% Y-o-Y (520bps contraction in EBITDA margins, led by of
one-off impact from higher margins from Valtrex (RBXY) and full integration of
Taro (SUNP) that has lower EBITDA margins). Excluding Taro, SUNP’s margin is
expected to decline due to higher fixed costs in Caraco.
Strong earnings growth, ex Sun Pharma and Ranbaxy
We expect relatively higher growth in earnings during the quarter. Excluding
RBXY and SUNP, adjusted PAT is likely to grow 17% Y-o-Y for the quarter, led by
strong earnings growth in DRRD (49% Y-o-Y), ARBP (43% Y-o-Y), and Cadila
(23% Y-o-Y). However, lower growth and higher fixed cost will lead to decline in
earnings for RBXY (-61% Y-o-Y), Unichem (-25% Y-o-Y) and SUNP (-21% Y-o-
Y), resulting in 15% Y-o-Y decline in PAT of the pharma universe.
Outlook: Strong visibility in growth; margin pressures to recede
We expect strong revenue visibility for FY12, with double-digit growth in
domestic formulations and ROW markets and upsides in US generics from USD
35 bn patent expiries in FY12. Further, investments in field force and capacities
during FY11 are likely to consolidate and will result in higher growth over
H2FY12; however, performance could vary across companies. Pharma universe
is currently trading at 17x FY12E earnings, relative premium of 11% to Sensex,
which likely expands during market consolidation. Hence, we remain focused on
specific stock performance. DRRD and LPC are our top picks in large caps, and
TRP our preferred pick in mid caps.
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