We are in the last phase of the September quarter earnings season, and the results announced by the BSE 500 companies so far have shown signs of a sharp recovery, as compared to the June quarter, when the economic activity in the country was compromised due to lockdown in various regions. From the BSE 500 list, 216 companies have announced their September quarter results so far. We excluded banking and financial companies. Along with the index stocks we also analyse each sector quarterly earnings. (Data Source: ACE Equity)
The pharma space was remain in under pressure due to USFDA plant inspections, delay in approvals, pricing pressures in the quarter ended December 2017.
According to Edelweiss, revenue of the pharma companies are estimated to remain flat YoY, while EBITDA and PAT are likely to decline 15 percent and 19 percent, respectively, impacted by decline in US business and sharp appreciation in INR YoY against other major currencies.
The revenue from US market is expected to decline 11 percent YoY for the sector in constant currency (CC), as faster approvals, heightened competition and sustained pricing pressure to dent growth. However, the domestic sales are expected to grow 12 percent YoY on a low base.
The USFDA granted 246 nods in Q3FY18, which is the highest-ever approvals in a single quarter. Cadila Healthcare received 23 and Aurobindo Pharma got 18 approvals. Faster approvals have led to heightened competition and pricing pressure, suppressing overall sector’s earnings.
The firm believes that FY18 is likely to remain a disappointing year as appreciating rupee will be aggravated by US and domestic challenges. The top picks from the sector includes Dr Reddy’s Laboratories and Cadila Healthcare.
Nifty pharma index rose 5 percent during the quarter ended December 2017.
Edelweiss expects Dr Reddy's Laboratories' US revenue to grow 3 percent sequentially benefitting from new launches like gRenvela, gClolar and ram up in gDoxil. While in Cadila Healthcare expect 12 percent growth in the domestic business.
Cipla is expected to report flat revenue, while India business is expected to grow 12 percent YoY.
Divis Laboratories' topline to decline by 5 percent and EBITDA margin is expected to decline 650 bps YoY due to operating deleverage and 4 percent rupee appreciation over the past 1 year.Disclaimer:
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