PINC Research has come out with its report on pharma space. According to the research firm one can buy Lupin and Glenmark Pharma.
Rupee depreciates; Q2FY12 could be marred by MTM losses: With rupee depreciating by ~10% against the USD in last one quarter we analyse the impact of the same on the Pharma sector which derives nearly 50% of its revenue from the export segment.
The key highlights are as follows:
- Rupee depreciation likely to have neutral impact on the OPM of the companies during Q2FY12 as rupee on an average has remained flat YoY against the USD.
- There could be MTM losses during the quarter for companies having short term/working capital loans as rupee has depreciated by ~10% QoQ against the USD. Further, interest cost during the quarter could also see a sharp rise.
- Most of the companies are likely to increase the quantum of hedges as on Sept 2011 in order to lock their export revenue at attractive rates
Sun Pharma, Cipla and Glenmark better placed: We expect Sun Pharma to be a major beneficiary of the rupee depreciation given the fact that the company derives nearly 50% of its revenues from the export segment and has lower quantum of hedges (35-37% of net exports over the next 12 months). As a result, it could increase its hedges during the quarter. Further the company has negligible exposure to foreign currency debt. Although Cipla has hedged only 25-30% of its net export revenues, it has foreign currency loan to the tune of USD50- 60mn. The company has partially hedged its short term loans and could probably report lower MTM losses. Glenmark, on the other hand, doesn