See pharma sector's margins to dip 314 bps in 3QFY13: Angel

Angel Broking has come out with earning expectations for pharmaceutical sector for the October-December quarter of 2012. The research firm expects the Indian pharma sector to post lackluster numbers for 3QFY2013 on the sales front.

Angel Broking Q3FY2013 expectations for pharmaceutical sector:

We expect our coverage universe to register a 2.0% YoY flat top-line growth. The muted top-line growth during the period would be on account of last corresponding period's base. On the operating front, the margins are expected to decline by 314bp. This along with higher taxation is expected to lead the companies in our coverage universe to post a dip of 1.6% in net profit during the period. Amongst large caps, Sun Pharma is expected to post an 11.1%YoY sales growth. Cipla is expected to post a net sales growth of 18.3%. Other players, namely Lupin and Cadila Healthcare are expected to report a growth of 17.2% and 15.3%, respectively. DRL and Ranbaxy Laboratories on the other hand are expected to post a decline in their top-line by around 2.5% and 32.5% respectively. Amongst small caps, Indoco Remedies is expected to post a 30.8% YoY growth. Amongst the MNC pack, Sanofi India is likely to post a 15.1% YoY growth in net sales, while Glaxo Smithkline Pharmaceuticals is expected to post a 20.1% YoY growth in sales.

Outlook and Valuation

With an expected CAGR of ~20% in earnings over FY2012-14E for our universe of pharma stocks, we remain overweight on the sector maintaining a positive future outlook and earnings growth. Though the stocks have witness a good upsides, in near time, leavening little upsides for stocks in near time. However, given the opportunities, in the sector we maintain our long-term buy on the stocks.

Company	Net Sales		Net Profit
	3QFY13E	% Chg	3QFY13E	% Chg
Alembic Pharma	426	11.7	29	-34.8
Aurobindo	1,392	10.1	152	-
Cadila	1,559	15.3	182	21.7
Cipla	2,024	18.3	404	49.7
Dishman	315	18.7	24	41.8
Dr Reddys	2,700	-2.5	339	-33.9
Glaxo#	680	20.1	132	-10.2
Indoco Rem.	185	30.8	19	124
Ipca	731	21.5	93	-10.6
Lupin	2,100	17.2	259	10.1
Ranbaxy Lab#	2,525	-32.5	274	-36.1
Sanofi India#	389	15.1	59	64.7
Sun Pharma	2,383	11.1	584	-12.6

Note: Price as on December 31, 2012; Our numbers do not include MTM on foreign debt. # 4QCY2012

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