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Domestic pharma companies likely to see steady growth in Q1 FY13: Analysts

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Analysts are predicting that the the domestic pharma companies will see a strong and steady growth in first quarter (Q1) of financial year 2013 (FY 13).

According to a Q1 FY13 preview from Standard Chartered Securities, based on 10 top pharma companies in their universe, the companies are likely to report 27 per cent revenue growth, US formulations growth of 32 per cent y-o-y, organic domestic growth of 16 per cent y-o-y. It is estimated that EBITDA margin will expand 200 bps y-o-y to 22.1 per cent and PBT to grow 29 per cent y-o-y.

The Standard Chartered analysts estimate that these companies are is likely to witness robust revenue outlook. Sales in Q1FY13 are estimated to grow 27 per cent y-o-y, led by US formulations (61 per cent y-o-y, helped by currency and FTFs) and domestic formulations (18 per cent y-o-y). Organic base business (ex FTFs and acquisitions) is likely to grow at 19 per cent y-o-y, aided by ~12 per cent y-o-y currency depreciation, 20 per cent y-o-y constant currency growth in base US business and 16 per cent y-o-y organic growth in domestic formulations. Dr Reddy’s Laboratories (DRL), Lupin, Ranbaxy and Sun Pharma are expected to register revenue growth in excess of 25 per cent y-o-y.

According to estimates done by Kotak Institutional Equities Research, Q1FY13 is likely to be a strong and steady quarter though not a spectacular one, marred by hikes in tax rates and forex losses for certain companies under their coverage. While y-o-y sales growth is expected to remain strong for all, the PAT growth is expected to be mixed with a few companies reporting flat/PAT decline y-o-y due to hikes in tax rates, lower EBITDA margin y-o-y, forex losses (Jubilant, Glenmark, Ranbaxy and Cadila) and absence of licensing income. Most of the frontline generic companies are expected to report strong sales growth of above 25 per cent boosted by higher realisation in rupee terms, exclusivity sales in US for DRL, Lupin Ranbaxy, Glenmark and Sun Pharma on account of Ziprasidone, Lipitor, Cutivate and Stalevo and Lipodox respectively.

EBITDA margin trends will remain mixed across companies and it is expected that EBITDA margin to decline y-o-y for Glenmark, Cadila and Glaxo on account of high base last year, higher import content leading to higher import cost for Glaxo and consolidation of lower-margin businesses of Biochem and Bremer Pharma. DRL, Sun, Lupin and Ranbaxy are likely to report highest EBITDA margin improvement y-o-y of over 100 bps due to ongoing sales from exclusivities in US and operating leverage benefits due to pick-up in base business sales growth for SUN and Ranbaxy. However, it is expected that PAT will remain flat/ decline yoy for Cadila, Glenmark, Dishman, Jubilant and Ranbaxy.

EP News Bureau

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