Pharma Sector | Q3FY15E Results Preview :: IndiaNivesh

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Q3FY15 is expected to be another quarter of moderate growth,
however, stance remains positive
We expect 18 companies under INSPL Pharma universe to show aggregate sales
and adjusted PAT growth of 17.3% y-y and 10.7% y-y to Rs296bn and Rs51bn
(including financials of JOL). Excluding financials of JOL, we expect companies under
our coverage to deliver sales and adjusted PAT of Rs281bn and Rs51bn, growing by
18.1% y-y and 13.9% y-y, respectively. The downtrend in adjusted PAT y-y growth is
expected to continue for fourth consecutive quarter. Also, interestingly, it would be
second consecutive quarter, wherein, the y-y adjusted PAT growth would be lower
than y-y sales growth. This is mainly due to moderate y-y growth expected in adjusted
PAT of SUNP and contraction expected in adjusted PAT of DRRD. Company wise, we
expect CDH, INDR, LPC, SUNP, TRP and ALPM to show better than average growth
for the quarter.
EBITDA margin on aggregate basis is expected to remain steady sequentially, while
expected to dip 140bps y-y. This is due to lack of approvals and partly due to high
base of past year.
The lack of approvals in key US market and high base of past year may lead to such
downtrend in adjusted PAT growth for the quarter. However, we believe that slow
pace of approvals is a temporary phenomenon and the pace of approval would pick
up in future. The filings of products by pharma companies in most of the regulated
as well as emerging markets continued at robust pace, giving us enough comfort
for reversal in downtrend as and when the approval pace picks up.
Lower number of approvals and high base to result in further downtrend in y-y
growth of US sales on aggregate basis: We expect US sales on aggregate basis to
grow at lower rate than previous quarters at 18.2% to Rs93bn. This is mainly due to
less number of approvals during 9M FY15 compared to that of 9M FY14. In addition,
the base of past year was higher due to limited competition products sold by ARBP,
DRRD, LPC and SUNP. The number of filings by individual companies remains robust
and hence we expect trend of y-y growth in US sales on aggregate basis to improve
once pace of approvals picks up. Company-wise, CDH, TRP and ARBP are expected
to show superior y-y growth on the back of increased execution.

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