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Weak quarter across
Weak quarter for most of the pharma companies with domestic
formulations growth specifically weaker. Ebitda margins were also lower
on a YoY basis for most Indian pharma companies. A major reason for
this has been sales force expansion or commissioning of new facilities
that has led to cost increase while revenue growth has not come through
as per expectations. On the other hand, export growth was reasonably
strong in most cases specifically Sun Pharma, Dr Reddy’s and IPCA. Sun
Pharma and Ranbaxy reported profit decline due to a high base situation.
We expect earnings growth to pick up in case of Lupin, Torrent and Dr
Reddy’s over the coming quarter.
Exports growth strong
q US business continued to be strong in case of Dr Reddy’s and Sun Pharma
while it was slower in case of Ranbaxy, Lupin, Cadila and Torrent Pharma.
q Dr Reddy’s continued to gain market share in most of its niche launches that
have happened over last couple of quarters (Prevacid, Allegra OTC). We
expect Arixtra to add to growth in 2QFY12.
q Sun Pharma benefited with better than expected numbers at Taro while its
recurring business did lower than expected sales.
q Ranbaxy’s US business also declined QoQ due to Aricept declining materially
as a number of other companies entered with their generic versions.
q Cadila and Lupin fared poorly because of lack of new launches in recent
quarter in the US market.
q ANDA filings during this quarter were weak in general for most companies.
Weak quarter for domestic market
q 1QFY12 domestic formulations growth was weaker than usual for most Indian
pharma companies.
q Strong competitive pressure with price discounts being given by companies
like Cipla and GSK India to garner market share has been one of reasons for
slower growth.
q Another reason for slower net sales growth has been fading of tailwind from
excise duty reduction that is already getting in to the base.
q Domestic formulation is the most profitable segment. Considering low capital
requirements, companies with a relatively larger share of domestic
formulation revenues offer better visibility of profits and cash flows.
q Our preference for Cadila, Torrent and Sun Pharma stems from relatively high
exposure to domestic market.
Valuations still high; earnings growth expected to pick up
q While valuations in Indian pharma sector remain high, they are reasonable in
context of high visibility to earnings growth over the coming years.
q We expect the US to be a strong driver of earnings growth over coming two
years specifically for companies with high exposure to that market namely Dr
Reddy’s, Sun Pharma, Lupin and Cadila.
q We see earning upgrades especially in the companies with strong pipeline in
the US market as those materialize in to launches.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Weak quarter across
Weak quarter for most of the pharma companies with domestic
formulations growth specifically weaker. Ebitda margins were also lower
on a YoY basis for most Indian pharma companies. A major reason for
this has been sales force expansion or commissioning of new facilities
that has led to cost increase while revenue growth has not come through
as per expectations. On the other hand, export growth was reasonably
strong in most cases specifically Sun Pharma, Dr Reddy’s and IPCA. Sun
Pharma and Ranbaxy reported profit decline due to a high base situation.
We expect earnings growth to pick up in case of Lupin, Torrent and Dr
Reddy’s over the coming quarter.
Exports growth strong
q US business continued to be strong in case of Dr Reddy’s and Sun Pharma
while it was slower in case of Ranbaxy, Lupin, Cadila and Torrent Pharma.
q Dr Reddy’s continued to gain market share in most of its niche launches that
have happened over last couple of quarters (Prevacid, Allegra OTC). We
expect Arixtra to add to growth in 2QFY12.
q Sun Pharma benefited with better than expected numbers at Taro while its
recurring business did lower than expected sales.
q Ranbaxy’s US business also declined QoQ due to Aricept declining materially
as a number of other companies entered with their generic versions.
q Cadila and Lupin fared poorly because of lack of new launches in recent
quarter in the US market.
q ANDA filings during this quarter were weak in general for most companies.
Weak quarter for domestic market
q 1QFY12 domestic formulations growth was weaker than usual for most Indian
pharma companies.
q Strong competitive pressure with price discounts being given by companies
like Cipla and GSK India to garner market share has been one of reasons for
slower growth.
q Another reason for slower net sales growth has been fading of tailwind from
excise duty reduction that is already getting in to the base.
q Domestic formulation is the most profitable segment. Considering low capital
requirements, companies with a relatively larger share of domestic
formulation revenues offer better visibility of profits and cash flows.
q Our preference for Cadila, Torrent and Sun Pharma stems from relatively high
exposure to domestic market.
Valuations still high; earnings growth expected to pick up
q While valuations in Indian pharma sector remain high, they are reasonable in
context of high visibility to earnings growth over the coming years.
q We expect the US to be a strong driver of earnings growth over coming two
years specifically for companies with high exposure to that market namely Dr
Reddy’s, Sun Pharma, Lupin and Cadila.
q We see earning upgrades especially in the companies with strong pipeline in
the US market as those materialize in to launches.
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