Pharma - Q3FY12 Results Preview - Excellent quarter - 12012012 :Centrum

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Q3FY12 Results Preview

Pharma

Excellent quarter

We expect the twelve pharma companies under our coverage to post 18%YoY growth in sales during the quarter. Biocon is expected to report 24%YoY decline in revenues due to the divestment of Axicorp, Germany whereas Ranbaxy Labs (RLL) is expected to report 38%YoY sales growth due to the launch of generic Lipitor in the US. Pharma companies with higher exports are likely to benefit from the 8%QoQ depreciation of rupee against the dollar. We expect these companies to report 29%YoY growth in EBIDTA and 180bps improvement in EBIDTA margin from 19.5% to 21.3%. We expect 11%YoY improvement in net profit. The lower net profit growth is attributed to forex losses for Aurobindo Pharma and RLL. Overall, we expect pharma companies to report healthy performance for the quarter.

m  Good Revenue growth: We expect revenue of pharma companies at 18% on a YoY basis, on the back of good growth in the domestic market and benefit of rupee depreciation on exports. However, most companies have hedged the currencies and hence are unlikely to derive full benefits from forex fluctuations.

m  Improvement in EBITDA margin: We expect the EBITDA margin of RLL to improve due to strong revenue growth and high margin FTF opportunity for generic Lipitor.

m  MTM losses due to currency fluctuations: We expect Aurobindo Pharma to reportRs1.6bn MTM loss due to 8%QoQ depreciation in rupee. RLL is expected to report Rs5.6bn MTM loss on loans and derivative contracts.

m  Lupin remains our preferred pick in the space: Lupin continues to be our best pick in the sector on account of improvement in its performance across geographies. The company is likely to report good growth in the domestic market, US, Europe and Japan. The acquisition of I-rom, Japan is likely to improve revenues from Japan.