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Pharmaceuticals
Consolidated topline to grow at ~21% YoY
The pharma companies under our coverage are expected to deliver
mixed results. We are not considering the numbers for Piramal and
Alembic on account of restructuring and demerger, respectively. In
the remaining pack, again Sun’s numbers will not be comparable on
account of consolidation of Taro’s numbers and also due to
discontinuance of anti-ulcerant Protonix and anti-cancer Eloxatin in
the US market. Similar is the case for Opto Circuits, which completed
the acquisition of US based Cardiac Science and Elder Pharma.
Companies like Aurobindo, Cadila, Glenmark, Indoco, Lupin, Strides
and Unichem are expected to report good sales growth on a YoY
basis on account of new launches and increase in field force. We
expect Cadila to lead the pack with ~24% sales growth. Biocon is
expected to see muted sales growth on account of weak Axicorp
sales. We expect domestic formulation sales to be the main growth
driver. Also, the slowdown in the US may continue in Q4 as well.
Overall, our pharma universe is expected to clock ~21% sales
growth YoY to | 9422 crore.
EBITDA to grow at ~12% YoY
We expect the EBITDA of the coverage universe to witness ~12%
YoY growth to | 2095 crore. Overall, we do not see any major
pressure on the margins front on account of higher crude prices.
However, we have considered ~50 bps impact for a safer estimate.
We see margin pressure mainly on account of an increase in the field
force, expanded capacities and acquisitions. Overall EBITDA margins
for the universe are expected to be ~ 22%.
PAT to witness marginal growth of ~ 3% YoY
We expect the PAT of the coverage universe to witness a
marginal~3% increase to | 1355 crore YoY due to the abovementioned
reasons. Cadila, Biocon, Glenmark, Indoco and Ipca are
expected to lead the pack.
Company specific view
Company Remarks
Aurobindo
Pharma
The sales are expected to grow ~18% YoY mainly driven by ~27% growth in the
formulation business. The EBITDA margins are expected to expand ~200 bps YoY but
fall sequentially by ~630 bps due to higher compliance expenses and lower licensing
income. The net profit is expected to decline ~4% YoY
Biocon We expect sales to grow only ~11% YoY on the back of 10% de-growth in Axicorp
sales due to German government mandate of 16% flat rebate on all drugs. However, biopharmaceuticals
(excluding Axicorp) are expected to grow ~20% YoY. EBITDA margins
are expected to increase ~250-300 bps YoY
Cadila
Healthcare
The sales are expected to grow ~23% YoY driven by ~15% growth in the domestic
formulation business, ~25% growth in the consumer products business and ~33%
growth in the North America business. EBITDA margins may decline marginally by 40-
50 bps YoY
Dishman
Pharma
We expect sales to grow ~3-4% YoY as it took a decision to stop the execution of
lower margin orders at Carbogen Amcis. EBITDA margins will continue to remain under
pressure due to Carbogen restructuring and higher cost burn at Unit 9 of the Bavla
facility
Elder Pharma The results will not be comparable as it completed the acquisition of Biomeda and
NeutraHealth. We expect overall sales to grow ~ 26% YoY. The growth will be driven
by new launches and consolidation of the Shelcal brand.
Glenmark
Pharma
Sales are expected to post ~16-17% YoY growth mainly driven by new launches in the
US and domestic branded formulation business. EBITDA margins will slip ~100-150
bps on account of higher legal and other expenses
Indoco
Remedies
We expect sales to witness a growth of ~18% YoY on the back of a recovery in antiinfective
& respiratory segments and new launches in both domestic & semi-regulated
markets. Indoco launched eight products during the first nine months in the domestic
market. This is expected to drive growth
Ipca
laboratories
We expect sales to grow at ~16% YoY, which would be driven by both the export
formulations and APIs business. A recovery in the anti-malarial segment, CVS and antidiabetic
segments will drive the domestic formulation growth
Lupin We expect the branded formulation business in the US market to recover in Q4FY11
after ~10% fall in Q3FY11. The US generic business is expected to carry its growth
momentum on account of aggressive generic launches. Overall, we expect Lupin to
register ~17-18% YoY growth in sales
Opto Circuits The numbers will not be comparable on account of the acquisition of the US-based
Cardiac Science. We expect sales to witness a growth of ~55% YoY mainly driven by
the invasive segment. EBITDA margins would dip by ~700-800 bps YoY as we expect
Cardiac to post a loss at the EBITDA level
Strides
Arcolab
We expect Strides to post ~18% YoY growth in sales mainly driven by ~30% growth in
the specialities business. EBITDA margins will remain flat YoY. However, net profit is
expected to decline by 1% on the back of lower forex gains. Excluding forex impact, we
expect adjusted net profit to grow ~17% YoY
Sun Pharma The numbers will not be comparable on account of the Taro acquisition. On a like to like
basis, we expect sales to grow only ~3% YoY due to a fall in Caraco sales. Including
Taro numbers, sales are expected to grow ~30% YoY. EBITDA margins may decline
by~700-800 bps on account of Taro consolidation and absence of revenues from
exclusivity products
Torrent
Pharma
The topline is expected to grow ~18% YoY on the back of ~17% growth in the
domestic business and ~20% growth in the export business. However, EBITDA
margins are expected to decline ~150-200 bps as the company has increased its field
force and completed the expansion of the Indrad facility
Unichem labs
Sales are expected to grow at ~13% YoY mainly due to ~12% growth in the domestic
formulation business. The exports formulations business is expected to grow 20% YoY.
EBITDA margins may decline ~ 250 bps as the company has increased its field force
and commissioned a new manufacturing facility
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pharmaceuticals
Consolidated topline to grow at ~21% YoY
The pharma companies under our coverage are expected to deliver
mixed results. We are not considering the numbers for Piramal and
Alembic on account of restructuring and demerger, respectively. In
the remaining pack, again Sun’s numbers will not be comparable on
account of consolidation of Taro’s numbers and also due to
discontinuance of anti-ulcerant Protonix and anti-cancer Eloxatin in
the US market. Similar is the case for Opto Circuits, which completed
the acquisition of US based Cardiac Science and Elder Pharma.
Companies like Aurobindo, Cadila, Glenmark, Indoco, Lupin, Strides
and Unichem are expected to report good sales growth on a YoY
basis on account of new launches and increase in field force. We
expect Cadila to lead the pack with ~24% sales growth. Biocon is
expected to see muted sales growth on account of weak Axicorp
sales. We expect domestic formulation sales to be the main growth
driver. Also, the slowdown in the US may continue in Q4 as well.
Overall, our pharma universe is expected to clock ~21% sales
growth YoY to | 9422 crore.
EBITDA to grow at ~12% YoY
We expect the EBITDA of the coverage universe to witness ~12%
YoY growth to | 2095 crore. Overall, we do not see any major
pressure on the margins front on account of higher crude prices.
However, we have considered ~50 bps impact for a safer estimate.
We see margin pressure mainly on account of an increase in the field
force, expanded capacities and acquisitions. Overall EBITDA margins
for the universe are expected to be ~ 22%.
PAT to witness marginal growth of ~ 3% YoY
We expect the PAT of the coverage universe to witness a
marginal~3% increase to | 1355 crore YoY due to the abovementioned
reasons. Cadila, Biocon, Glenmark, Indoco and Ipca are
expected to lead the pack.
Company specific view
Company Remarks
Aurobindo
Pharma
The sales are expected to grow ~18% YoY mainly driven by ~27% growth in the
formulation business. The EBITDA margins are expected to expand ~200 bps YoY but
fall sequentially by ~630 bps due to higher compliance expenses and lower licensing
income. The net profit is expected to decline ~4% YoY
Biocon We expect sales to grow only ~11% YoY on the back of 10% de-growth in Axicorp
sales due to German government mandate of 16% flat rebate on all drugs. However, biopharmaceuticals
(excluding Axicorp) are expected to grow ~20% YoY. EBITDA margins
are expected to increase ~250-300 bps YoY
Cadila
Healthcare
The sales are expected to grow ~23% YoY driven by ~15% growth in the domestic
formulation business, ~25% growth in the consumer products business and ~33%
growth in the North America business. EBITDA margins may decline marginally by 40-
50 bps YoY
Dishman
Pharma
We expect sales to grow ~3-4% YoY as it took a decision to stop the execution of
lower margin orders at Carbogen Amcis. EBITDA margins will continue to remain under
pressure due to Carbogen restructuring and higher cost burn at Unit 9 of the Bavla
facility
Elder Pharma The results will not be comparable as it completed the acquisition of Biomeda and
NeutraHealth. We expect overall sales to grow ~ 26% YoY. The growth will be driven
by new launches and consolidation of the Shelcal brand.
Glenmark
Pharma
Sales are expected to post ~16-17% YoY growth mainly driven by new launches in the
US and domestic branded formulation business. EBITDA margins will slip ~100-150
bps on account of higher legal and other expenses
Indoco
Remedies
We expect sales to witness a growth of ~18% YoY on the back of a recovery in antiinfective
& respiratory segments and new launches in both domestic & semi-regulated
markets. Indoco launched eight products during the first nine months in the domestic
market. This is expected to drive growth
Ipca
laboratories
We expect sales to grow at ~16% YoY, which would be driven by both the export
formulations and APIs business. A recovery in the anti-malarial segment, CVS and antidiabetic
segments will drive the domestic formulation growth
Lupin We expect the branded formulation business in the US market to recover in Q4FY11
after ~10% fall in Q3FY11. The US generic business is expected to carry its growth
momentum on account of aggressive generic launches. Overall, we expect Lupin to
register ~17-18% YoY growth in sales
Opto Circuits The numbers will not be comparable on account of the acquisition of the US-based
Cardiac Science. We expect sales to witness a growth of ~55% YoY mainly driven by
the invasive segment. EBITDA margins would dip by ~700-800 bps YoY as we expect
Cardiac to post a loss at the EBITDA level
Strides
Arcolab
We expect Strides to post ~18% YoY growth in sales mainly driven by ~30% growth in
the specialities business. EBITDA margins will remain flat YoY. However, net profit is
expected to decline by 1% on the back of lower forex gains. Excluding forex impact, we
expect adjusted net profit to grow ~17% YoY
Sun Pharma The numbers will not be comparable on account of the Taro acquisition. On a like to like
basis, we expect sales to grow only ~3% YoY due to a fall in Caraco sales. Including
Taro numbers, sales are expected to grow ~30% YoY. EBITDA margins may decline
by~700-800 bps on account of Taro consolidation and absence of revenues from
exclusivity products
Torrent
Pharma
The topline is expected to grow ~18% YoY on the back of ~17% growth in the
domestic business and ~20% growth in the export business. However, EBITDA
margins are expected to decline ~150-200 bps as the company has increased its field
force and completed the expansion of the Indrad facility
Unichem labs
Sales are expected to grow at ~13% YoY mainly due to ~12% growth in the domestic
formulation business. The exports formulations business is expected to grow 20% YoY.
EBITDA margins may decline ~ 250 bps as the company has increased its field force
and commissioned a new manufacturing facility
Source: Company, ICICIdirect.com Research
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