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Pharma universe reported strong results with an all round performance in
terms growth and profitability. Revenue growth was strong at 17% YoY,
led by an outperformance in the US and ROW whereas domestic growth
varied. Gross margins expanded by 335 bps YoY, reflecting the benefits of
a favourable currency movement and an improved product mix. Despite
better gross margins, EBITDA margins improved marginally YoY due to
higher inflationary trend. Overall, PAT growth at 6.7% YoY was impacted
by increase in interest costs (40% YoY) and higher taxes.
Outperformance within coverage universe
Outperformance was seen across the coverage universe barring few companies.
Ranbaxy (RBXY) reported numbers below estimates due to operational inefficiencies
and lower growth in key geographies. Among mid-caps, IPCA Labs (IPCA) and Torrent
Pharma (TRP) put up a strong operating show despite slower growth in the domestic
market. Aurobindo’s (ARBP) performance was significantly below expectations due to
decline in growth and higher FDA related costs. Cadila (CDH), among large caps,
reported lower earnings traction due to consolidation in the business.
Robust growth in US generics
Growth in the US was strong (up 30% YoY) and had a positive impact from three
factors: a) higher patent cliff b) higher approvals and c) supply issues due to
manufacturing woes at Teva and Hospira. Further, the INR depreciation was the icing
on the cake, leading to higher realisations. We expect a sustained growth momentum
in the US during the second-half, with lined up interesting launches including Lipitor,
Geodon and Cauduet among others.
Strong growth visibility on US, domestic markets
Earnings momentum across the coverage universe has been strong led by a) strong out
performance in the US, b) better-than-expected growth in the domestic market and c)
improved realisations. Going forward, we expect the earnings traction to remain strong
(20%-30% earnings CAGR over FY11-13E) for most of the coverage universe except
Cadila and Aurobindo Pharma.
Valuations: Strengthening from the core
Despite a 12% YTD correction in the BSE Healthcare index, pharma universe continued
to trade at 32% premium to the Sensex, higher than the historical range of 10%-15%.
We believe multiples could sustain at the current level with further consolidation in the
market, though in the course of a turnaround we expect premium to shrink to long
term average. We continue to prefer a more stock specific approach and recommend
Lupin and Glenmark as our preferred bets in the space. Cipla’s domestic turnaround
was in-line with our expectations and rendered momentum to earnings. We expect
Cipla’s performance to continue in domestic market and remain positive on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pharma universe reported strong results with an all round performance in
terms growth and profitability. Revenue growth was strong at 17% YoY,
led by an outperformance in the US and ROW whereas domestic growth
varied. Gross margins expanded by 335 bps YoY, reflecting the benefits of
a favourable currency movement and an improved product mix. Despite
better gross margins, EBITDA margins improved marginally YoY due to
higher inflationary trend. Overall, PAT growth at 6.7% YoY was impacted
by increase in interest costs (40% YoY) and higher taxes.
Outperformance within coverage universe
Outperformance was seen across the coverage universe barring few companies.
Ranbaxy (RBXY) reported numbers below estimates due to operational inefficiencies
and lower growth in key geographies. Among mid-caps, IPCA Labs (IPCA) and Torrent
Pharma (TRP) put up a strong operating show despite slower growth in the domestic
market. Aurobindo’s (ARBP) performance was significantly below expectations due to
decline in growth and higher FDA related costs. Cadila (CDH), among large caps,
reported lower earnings traction due to consolidation in the business.
Robust growth in US generics
Growth in the US was strong (up 30% YoY) and had a positive impact from three
factors: a) higher patent cliff b) higher approvals and c) supply issues due to
manufacturing woes at Teva and Hospira. Further, the INR depreciation was the icing
on the cake, leading to higher realisations. We expect a sustained growth momentum
in the US during the second-half, with lined up interesting launches including Lipitor,
Geodon and Cauduet among others.
Strong growth visibility on US, domestic markets
Earnings momentum across the coverage universe has been strong led by a) strong out
performance in the US, b) better-than-expected growth in the domestic market and c)
improved realisations. Going forward, we expect the earnings traction to remain strong
(20%-30% earnings CAGR over FY11-13E) for most of the coverage universe except
Cadila and Aurobindo Pharma.
Valuations: Strengthening from the core
Despite a 12% YTD correction in the BSE Healthcare index, pharma universe continued
to trade at 32% premium to the Sensex, higher than the historical range of 10%-15%.
We believe multiples could sustain at the current level with further consolidation in the
market, though in the course of a turnaround we expect premium to shrink to long
term average. We continue to prefer a more stock specific approach and recommend
Lupin and Glenmark as our preferred bets in the space. Cipla’s domestic turnaround
was in-line with our expectations and rendered momentum to earnings. We expect
Cipla’s performance to continue in domestic market and remain positive on the stock.
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