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Q 2 e a r n i n g s - M i x e d f o r e x i m p a c t …
Overall Q2FY12 results of the pharma industry were a mixed bag on the
back of forex losses. Majority of the companies have posted healthy
topline growth driven by the US and emerging markets. However, a
sharp depreciation of the rupee against major currencies like 9.4% vs.
US$ led companies to book huge notional forex losses.
On the domestic front, the formulations market grew 13.7% in October
2011 lower than the 15% growth in September as per the latest All India
Organisation of Chemists & Druggists (AIOCD) data. On a MAT basis, the
Indian pharma market improved slightly from 14.4% in September 2011
to 14.5% in MAT October 2011. The current Indian pharma market is
around | 58,619 crore for 12 months ending October 2011, as per AIOCD
data.
Despite a slowdown across the industry, select players like Sun Pharma,
Lupin, Glenmark Pharma, Pfizer India, Ipca Laboratories and Novartis
India have grown more than industry growth rate during October 2011.
Smaller players like Indoco Remedies and Unichem Laboratories
continued to suffer in the domestic market. We observed higher bonus
push from companies like Mankind, Cipla and Cadila Healthcare during
October.
On the product approval front, during the period October 1 – November
15, Strides Arcolab and Sun Pharma received maximum number of
approvals i.e. five approvals each from the USFDA. Strides received
approvals for three oncology products, which were licensed to Pfizer. Of
late, we have observed expedition of approvals from the USFDA
especially for injectibles due to shortage of injections in some categories.
S e c t o r v i e w
The healthcare index managed to outperform the broader market on
account of dampened global sentiments and some value buying in select
stocks. Some leading large caps such as Sun, DRL, Cipla and Lupin have
shown good resilience. Even some of the midcaps such as Glenmark,
Ipca, Jubilant and Strides have also withstood the selling pressure. This
is once again a vindication for the sector’s defensive status and a safe
haven in volatile periods. The Q2 numbers were boosted by a strong
showing in the overseas market, thanks to sharp INR depreciation vis-à-
vis major currencies. However, on the profitability front, most of the
companies took a severe beating on account of notional MTM charge for
forex loans restatement. Going ahead, we expect continued INR
depreciation to have a negative impact on a majority of companies,
which own forex loans. This will also weigh on the valuation until some
sort of stability is restored. On account of this, we expect some squeeze
in valuation premium vis-à-vis broader markets in the short to medium
term. Overall, good traction from the US, Japan and other developed
markets supported by product approvals, a growing presence in
Pharmerging markets and a strong foothold in India are some aspects
that will continue to weigh on the relative outperformance vis-à-vis
broader markets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q 2 e a r n i n g s - M i x e d f o r e x i m p a c t …
Overall Q2FY12 results of the pharma industry were a mixed bag on the
back of forex losses. Majority of the companies have posted healthy
topline growth driven by the US and emerging markets. However, a
sharp depreciation of the rupee against major currencies like 9.4% vs.
US$ led companies to book huge notional forex losses.
On the domestic front, the formulations market grew 13.7% in October
2011 lower than the 15% growth in September as per the latest All India
Organisation of Chemists & Druggists (AIOCD) data. On a MAT basis, the
Indian pharma market improved slightly from 14.4% in September 2011
to 14.5% in MAT October 2011. The current Indian pharma market is
around | 58,619 crore for 12 months ending October 2011, as per AIOCD
data.
Despite a slowdown across the industry, select players like Sun Pharma,
Lupin, Glenmark Pharma, Pfizer India, Ipca Laboratories and Novartis
India have grown more than industry growth rate during October 2011.
Smaller players like Indoco Remedies and Unichem Laboratories
continued to suffer in the domestic market. We observed higher bonus
push from companies like Mankind, Cipla and Cadila Healthcare during
October.
On the product approval front, during the period October 1 – November
15, Strides Arcolab and Sun Pharma received maximum number of
approvals i.e. five approvals each from the USFDA. Strides received
approvals for three oncology products, which were licensed to Pfizer. Of
late, we have observed expedition of approvals from the USFDA
especially for injectibles due to shortage of injections in some categories.
S e c t o r v i e w
The healthcare index managed to outperform the broader market on
account of dampened global sentiments and some value buying in select
stocks. Some leading large caps such as Sun, DRL, Cipla and Lupin have
shown good resilience. Even some of the midcaps such as Glenmark,
Ipca, Jubilant and Strides have also withstood the selling pressure. This
is once again a vindication for the sector’s defensive status and a safe
haven in volatile periods. The Q2 numbers were boosted by a strong
showing in the overseas market, thanks to sharp INR depreciation vis-à-
vis major currencies. However, on the profitability front, most of the
companies took a severe beating on account of notional MTM charge for
forex loans restatement. Going ahead, we expect continued INR
depreciation to have a negative impact on a majority of companies,
which own forex loans. This will also weigh on the valuation until some
sort of stability is restored. On account of this, we expect some squeeze
in valuation premium vis-à-vis broader markets in the short to medium
term. Overall, good traction from the US, Japan and other developed
markets supported by product approvals, a growing presence in
Pharmerging markets and a strong foothold in India are some aspects
that will continue to weigh on the relative outperformance vis-à-vis
broader markets.
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