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Pharmaceuticals
Consolidated topline to grow at ~15% YoY
The Pharma companies under I-Direct coverage are expected to post
steady growth of ~15% to | 11097 crore on the back of Rupee
depreciation, new launches and acquisitions. Excluding Biocon’s
Axicorp divestment (|220 crore) and higher licensing incomes to the
tune of | 280 crore in Q3FY11, the like to like growth is expected to be
~20%. The Rupee has depreciated by almost 11% vis-à-vis
corresponding quarter last year. This will benefit most of the companies
from the universe. Companies like Glenmark, Lupin, Ipca, Strides and
Sun are expected to register healthy growth in sales driven by
incremental launches in the US and emerging markets. Divi’s Labs is
also expected to register good numbers on account of revival in
CRAMS. Aurobindo may clock negative growth on account of higher
base and structural issues. Cadila and Unichem are expected to post
lower growth in sales on account of slowdown in consumer business
and domestic formulations respectively.
EBITDA to grow by marginally by ~10%
We expect the EBIDTA of the coverage universe to witness lower
growth of ~10% YoY to |2523 crore due to factors like MTM provision
by Glenmark for restated forex loans and sharp de-growth in case of
Aurobindo and Unichem.
Net profit to grow by 2% YoY on back of translation losses
We expect the net profit of the coverage universe to grow by just ~2%
on the back of MTM losses and increase in the tax rates. Although the
government has given option to the companies to do away with the
practice of providing MTM losses in the P&L, we have not considered
this relief in our calculation for want of company specific details. Hence
actual PAT numbers may vary significantly.
Company specific view
Company Remarks
Aurobindo
Pharma
Aurobindo’s sales are expected to decline 3% YoY due to lower licensing income.
However, we expect US formulations to grow by 15% YoY. EBITDA margins to remain
under pressure due to higher spends on corrective measures and power cost. We
expect company to post net loss of | 32 crore on the back of MTM losses.
Biocon We expect Biocon sales to decline by 18% YoY due to divestment in AxiCrop. On
comparable basis, we expect sales to grow by 17% on the back of new launches in
the domestic market. EBITDA margins are expected to improve by ~440 bps YoY due
to exit from low margin Axicorp.
Cadila
Healthcare
Cadila's is expected to clock ~13% sales growth YoY driven by ~25% growth in the
US. We expect some recovery in the domestic formulation business with a growth of
10%. Despite currency benefit, EBITDA margins may decline marginally by ~50 bps
YoY due to lower growth in high margins domestic formulation business.
Divi's
Laboratories
We expect Divi’s Laboratories to register sales growth of 24.5% YoY driven by both
API and Custom Synthesis. EBITDA margins are expected to decline by 130 bps YoY
on the back of commissioning of fourth manufacturing facility at Vizag.
Elder Pharma Elder Pharma results will not be comparable on YoY basis as it completed acquisition
of Biomeda and NutraHealth in Q3FY11. We expect overall sales to grow ~ 31% YoY
and like to like sales to grow ~ 17%. The growth in the base business will be driven
by women healthcare and Anti-infective segments.
Glenmark
Pharma
Glenmark’s sales is expected to grow ~21% YoY on account of 30% and 18% growth
in the US generics and domestic formulations respectively. However, we expect
company to book MTM loss of | 70 crore, which can lead to decline in EBITDA
margins by ~760 bps. Excluding MTM loss, margins up by 40 bps.
Indoco Remedies We expect Indoco to post sales growth of 14.5% driven by exports formulations.
EBITDA margins are expected to improve by 200 bps to 14.8% on the back of lower
base and rupee depreciation.
Ipca laboratories We expect Ipca laboratories to clock sales growth of ~22% YoY on account of ~40%
growth in export formulations. We expect moderate growth of 15% in domestic
formulations. We expect EBITDA margins to increase by ~440 bps YoY on a lower
base and improvement in realisation.
Lupin Lupin is expected to clock sales growth of ~20% YoY, driven by growth in both
domestic and advanced markets. With price erosion in Anti-hypertensive Lotrel, we
expect EBITDA margins to decline by 20 bps YoY.
Opto Circuits Opto numbers will not be comparable on YoY basis on account of Cardiac Science
(CSC) acquisition. We expect sales to grow by ~40% driven by invasive segment.
Like to like sales are expected to grow by 20%. EBITDA margins to decline by ~340
bps YoY on the back consolidation of CSC.
Strides Arcolab We expect strides to post strong growth of ~29% in YoY sales driven by ~50%
growth in Speciality business. The base Speciality business expected to grow ~27%
YoY on account of new launches.
Sun Pharma We expect sales to increase by 19% YoY on the back of 20% growth in both domestic
formulations and Taro. With improvement in EBITDA margins at Taro, we expect
EBITDA margins to increase by ~430 bps YoY.
Torrent Pharma Torrent’s topline is expected to grow ~17.3% YoY on the back of ~20% growth in
Brazilian sales and ~55% growth in the US. However, we expect domestic
formulation business to grow by ~10% YoY. We expect EBITDA margins to remain
flat at 19.9%.
Unichem Labs We expect Unichem to post a lower growth of ~6% YoY on the back of inventory
rationalisation in domestic formulations business. We expect export formulation
business to grow by ~15% YoY. However, EBITDA margins are expected to decline
by ~430 bps.
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 ~15% YoY
The Pharma companies under I-Direct coverage are expected to post
steady growth of ~15% to | 11097 crore on the back of Rupee
depreciation, new launches and acquisitions. Excluding Biocon’s
Axicorp divestment (|220 crore) and higher licensing incomes to the
tune of | 280 crore in Q3FY11, the like to like growth is expected to be
~20%. The Rupee has depreciated by almost 11% vis-à-vis
corresponding quarter last year. This will benefit most of the companies
from the universe. Companies like Glenmark, Lupin, Ipca, Strides and
Sun are expected to register healthy growth in sales driven by
incremental launches in the US and emerging markets. Divi’s Labs is
also expected to register good numbers on account of revival in
CRAMS. Aurobindo may clock negative growth on account of higher
base and structural issues. Cadila and Unichem are expected to post
lower growth in sales on account of slowdown in consumer business
and domestic formulations respectively.
EBITDA to grow by marginally by ~10%
We expect the EBIDTA of the coverage universe to witness lower
growth of ~10% YoY to |2523 crore due to factors like MTM provision
by Glenmark for restated forex loans and sharp de-growth in case of
Aurobindo and Unichem.
Net profit to grow by 2% YoY on back of translation losses
We expect the net profit of the coverage universe to grow by just ~2%
on the back of MTM losses and increase in the tax rates. Although the
government has given option to the companies to do away with the
practice of providing MTM losses in the P&L, we have not considered
this relief in our calculation for want of company specific details. Hence
actual PAT numbers may vary significantly.
Company specific view
Company Remarks
Aurobindo
Pharma
Aurobindo’s sales are expected to decline 3% YoY due to lower licensing income.
However, we expect US formulations to grow by 15% YoY. EBITDA margins to remain
under pressure due to higher spends on corrective measures and power cost. We
expect company to post net loss of | 32 crore on the back of MTM losses.
Biocon We expect Biocon sales to decline by 18% YoY due to divestment in AxiCrop. On
comparable basis, we expect sales to grow by 17% on the back of new launches in
the domestic market. EBITDA margins are expected to improve by ~440 bps YoY due
to exit from low margin Axicorp.
Cadila
Healthcare
Cadila's is expected to clock ~13% sales growth YoY driven by ~25% growth in the
US. We expect some recovery in the domestic formulation business with a growth of
10%. Despite currency benefit, EBITDA margins may decline marginally by ~50 bps
YoY due to lower growth in high margins domestic formulation business.
Divi's
Laboratories
We expect Divi’s Laboratories to register sales growth of 24.5% YoY driven by both
API and Custom Synthesis. EBITDA margins are expected to decline by 130 bps YoY
on the back of commissioning of fourth manufacturing facility at Vizag.
Elder Pharma Elder Pharma results will not be comparable on YoY basis as it completed acquisition
of Biomeda and NutraHealth in Q3FY11. We expect overall sales to grow ~ 31% YoY
and like to like sales to grow ~ 17%. The growth in the base business will be driven
by women healthcare and Anti-infective segments.
Glenmark
Pharma
Glenmark’s sales is expected to grow ~21% YoY on account of 30% and 18% growth
in the US generics and domestic formulations respectively. However, we expect
company to book MTM loss of | 70 crore, which can lead to decline in EBITDA
margins by ~760 bps. Excluding MTM loss, margins up by 40 bps.
Indoco Remedies We expect Indoco to post sales growth of 14.5% driven by exports formulations.
EBITDA margins are expected to improve by 200 bps to 14.8% on the back of lower
base and rupee depreciation.
Ipca laboratories We expect Ipca laboratories to clock sales growth of ~22% YoY on account of ~40%
growth in export formulations. We expect moderate growth of 15% in domestic
formulations. We expect EBITDA margins to increase by ~440 bps YoY on a lower
base and improvement in realisation.
Lupin Lupin is expected to clock sales growth of ~20% YoY, driven by growth in both
domestic and advanced markets. With price erosion in Anti-hypertensive Lotrel, we
expect EBITDA margins to decline by 20 bps YoY.
Opto Circuits Opto numbers will not be comparable on YoY basis on account of Cardiac Science
(CSC) acquisition. We expect sales to grow by ~40% driven by invasive segment.
Like to like sales are expected to grow by 20%. EBITDA margins to decline by ~340
bps YoY on the back consolidation of CSC.
Strides Arcolab We expect strides to post strong growth of ~29% in YoY sales driven by ~50%
growth in Speciality business. The base Speciality business expected to grow ~27%
YoY on account of new launches.
Sun Pharma We expect sales to increase by 19% YoY on the back of 20% growth in both domestic
formulations and Taro. With improvement in EBITDA margins at Taro, we expect
EBITDA margins to increase by ~430 bps YoY.
Torrent Pharma Torrent’s topline is expected to grow ~17.3% YoY on the back of ~20% growth in
Brazilian sales and ~55% growth in the US. However, we expect domestic
formulation business to grow by ~10% YoY. We expect EBITDA margins to remain
flat at 19.9%.
Unichem Labs We expect Unichem to post a lower growth of ~6% YoY on the back of inventory
rationalisation in domestic formulations business. We expect export formulation
business to grow by ~15% YoY. However, EBITDA margins are expected to decline
by ~430 bps.
Source: Company, ICICIdirect.com Research
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