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Pharmaceuticals
ƒ Consolidated topline to grow at ~21.4% YoY
The pharma companies under our coverage are expected to post mixed
results. The results of companies like Sun Pharma, Elder Pharma, Opto
Circuits and Biocon are not comparable on the back of acquisitions and
sell-offs. Overall, our pharma universe is expected to clock ~ 21.4%
sales growth YoY to | 10698 crore. On a like-to-like basis, growth will be
~18% YoY. Other than the depreciation of the rupee vis-à-vis leading
currencies like the US dollar, euro and yen, good traction from the US
and emerging markets is expected to contribute to the growth. On the
flip side, we expect subdued growth in domestic formulations on the
back of lower growth in anti-infectives and gastroenterologicals (GI).
Lupin and Sun are expected to register good growth in domestic
formulations despite overall slowdown. Companies like Indoco
Remedies and Ipca Laboratories are expected to post below 15%
growth due to lower growth in the anti-infective segments. On the US
and other advanced markets front, we expect companies like Lupin,
Sun, Glenmark and Aurobindo to do better. Biocon, Strides, Glenmark
and Lupin are expected to book licensing income from recent and
existing R&D tie ups. Unichem’s sales are expected to suffer on the back
of restructuring of distribution patterns.
ƒ EBITDA to grow marginally by 16.2%
We expect the EBIDTA of the coverage universe to witness lower
growth of ~16.2% YoY to | 2485 crore due to factors like consolidation
of low margin businesses by some companies, absence of revenues
from high margins F2F products, increase in field force and expansion
of capacities. Overall EBITDA margins for the universe are expected to
be ~23.2%, down by 100 bps YoY.
ƒ Net profit to decline by 8% YoY on translation losses & EO
We expect the net profit of the coverage universe to decline by 8% to |
1504 crore on the back of translation losses, one-time royalty payment
[extraordinary items (EO)] by Glenmark and increase in the tax rates
: Company specific view
Company Remarks
Aurobindo
Pharma
Aurobindo Pharma sales are expected to grow ~16% on YoY driven by ~22-25%
growth in the US . However EBITDA margins are expected to under pressure as new
product launches by clients in RoW & EU market were deferred. Net profit to decline
by ~60% YoY on the back of translation losses due to forex loans
Biocon We expect Biocon sales to decline by 23% YoY due to divestment in AxiCrop. On
comparable basis, we expect sales to grow by 27% YoY, driven by both BioPharmaceutical, and higher licensing income (| 25 crore). EBITDA margins to expand
more than ~810 bps YoY due to exit from low margin Axicorp
Cadila
Healthcare
Cadila Healthcare sales are expected to register ~16% growth YoY, driven by ~25%
growth in US business. On flip side, we expect domestic formulation business to
grow by 12% YoY. EBITDA margins may decline marginally by ~50 bps YoY due to
lower growth in high margins domestic formulation business
Elder Pharma Elder Pharma results will not be comparable on YoY basis as it completed acquisition
of Biomeda and NutraHealth. We expect overall sales to grow ~ 65% YoY and like to
like sales to grow ~ 17%. The growth in the base business will be driven by women
healthcare and life style segments
Glenmark
Pharma
We expect Glenmark to post sales growth of 17% YoY on a like to like basis. We
expect company to book | 112 crore of licensing income & EO loss of ~| 135 crore
for royalty. EBITDA margins to expand by ~720 bps YoY on the back of licensing
income and depreciation of rupee
Indoco Remedies We expect sales growth of ~12% YoY, mainly driven by growth in both exports
formulation & APIs. We expect domestic formulation business to grow marginally by
8% on the back slow down in the anti-infective segment. EBITDA margins are
expected to be under pressure on the back of addition of field force
Ipca laboratories We expect Ipca laboratories to clock sales growth of ~12% YoY on the back of lower
growth in domestic formulation business . On account of lower growth in
highmargins business and increase in the filed force, we expect EBITDA margins to
decline by 180 bps YoY
Lupin Lupin is expected to clock sales growth of ~26% YoY, driven by growth in both
domestic & advance markets and licensing income . Excluding licensing income,
sales to grow by ~18% YoY. We expect EBITDA margins to increase ~20 bps YoY on
the back of favourable currency impact and licensing income
Opto Circuits Opto numbers will not be comparable on YoY basis on account of Cardiac Science
acquisition. We expect sales to witness a growth of ~68% on YoY, driven from
Invasive segment. Like to like basis sales are expected to grow by 20%. EBITDA
margins to decline by ~760 bps YoY on the back consolidation
Strides Arcolab We expect strides to post 28% YoY growth mainly driven by ~76% growth in
Speciality business. Speciality business include | 50 crore licensing income. The
base Speciality business expected to grow ~30% YoY. Net profit is expected to
decline by ~46% on the back of translation losses on forex loans
Sun Pharma Sun‘s numbers will not be comparable on account of Taro acquisition. On a like to like
basis, we expect sales to up by ~3% YoY due to higher base in Q2FY11. Including
Taro, sales are expected to grow ~16% YoY. EBITDA margins to decline by ~460
bps on the back of Taro consolidation and higher spend for corrective measures
Torrent Pharma Torrent’s topline is expected to grow ~15% YoY on the back of ~15% growth in Brazil
sales and~30% growth in CRAMS business. We expect domestic formulation
business to grow by ~10% YoY. With increased field force and lower growth in
domestic formulations, we expect EBITDA margins to decline by ~30 bps YoY
Unichem Labs We expect Unichem to post de-growth of ~2.5% YoY on the back of inventory
rationalisation in domestic formulations. We expect export formulations to increase
by ~10% YoY. However, EBITDA margins are expected to decline by ~1040 bps on
back addition of field force and decline in higher margin sales
Source: Company, ICICIdirect.com Research
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