Indian pharma companies are likely to post moderate revenue growth of between 15% and 20% during the July-September quarter, largely aided by the rupee fall and rising exports.
However, increase in raw material costs are likely to mitigate such gains.
According to Centrum Broking, the 14 companies under its coverage are likely to report 15% year on year (yoy) growth in revenues for the second quarter despite the sharp price reduction of many major brands in the domestic market due to National Pharmaceuticals Pricing Policy (NPPP).
Aurobindo Pharma, Cipla and Sun Pharma are likely to report over 20% revenue growth on rising exports and rupee fall.
Ranjit Kapadia, senior vice-president, Centrum Broking, said the second quarter witnessed one of the lowest revenue growths at 8.2% year on year (yoy) for August, due to NPPP, a three-week strike by traders and higher demand for margins by them.
“As a result, margins of our 14 coverage companies were under pressure due to the reduction in price of several drugs and this is likely to continue for 2-3 quarters. We expect the pharma industry to report healthy growth from fiscal 2015 after the NPPP effect gets over,” he said.
Kapadia expects 110 basis points decline in operating profit (Ebitda) margins yoy to 23.6% for the 14 companies. The decline will largely be due to price reduction of major brands, higher trade margins, rise in imported raw material cost and higher transportation costs.
Arvind Bothra, vice president-institutional research, Religare Capital Markets, expects a strong Q2 for Sun Pharma led by factors like Prandin exclusivity with estimated sales of $15 million, rebound in Taro sales on price hikes with select customers ($164 million, up 7% quarter on quarter) and upside from low competition in generic Doryx and Doxil.
“Continued low competition in Doxil and potential scale-up of key US launches (Topicort spray, new offerings from URL) pose upside risks to our estimates,” said Bothra in his recent report.
Among companies expected to report single-digit revenue growth are Dishman Pharma, Glaxo, Pfizer and Wyeth. This, analysts said, would be on account of global slowdown in Crams business and price reduction of their major brands in the domestic market. Ranbaxy is likely to report 2% decline in revenues.
On the net profit front, Aurobindo Pharma and Ranbaxy Laboratories are set to get adversely impacted by mark-to-market losses due to rupee depreciation.
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