Pharmaceuticals: Exports continue to drive growth in Q1FY13
Export formulations (esp. US, impacted by FTF sales) and favorable currency led to a robust top-line growth in Q1FY2013. Growth in domestic market also added cheer, although it was largely seasonal during the quarter. Rupee depreciation acted as an icing on the cake, improving the gross margins, thereby boosting the operating performance of the sector
Results - A snapshot: During the quarter, our pharma universe posted a robust set of numbers with top-line growth of 34.1% y-o-y and OPM at 23.5% (up 300bp y-o-y), however, the adjusted PAT declined 11.2% y-o-y. The export business (up 47.9% y-o-y; largely owing to US, which grew 90.7% y-o-y) continued its growth momentum, while, the domestic business (up 15.8% y-o-y) showed signs of sustained growth momentum. Though Sun, Lupin and Ranbaxy continued to contribute mostly (FTF / one time sales) in US, improvement on base performance front was witnessed in Unichem, Cadila and Glenmark. The domestic camp was supported by strong growth from Cadila, Cipla, Dr Reddy’s, Glenmark, Ipca, Lupin and Unichem Labs.
- In-line: Dr Reddy’s, Glenmark, Ipca, Lupin, Strides Arcolab, Torrent, Unichem Labs, Vivimed Labs
- Above estimates: Cadila, Cipla, Divi’s Labs, JB Chemicals, Opto Circuits, Sun Pharma
- Below estimates: Aurobindo, Ranbaxy
Outlook: Going forward, the high growth momentum is expected to be unsustainable and that it might taper off, as fewer drugs would be up for patent expiry. Thus, Reliance Securities' prefer stocks with differentiated products and ANDA pipeline coupled with clear growth strategy in place. Strategic tie ups, outlicensing deals and exclusive product launches could result in significant incremental profitability and could surprise positively going in FY2013-14. Moreover, Indian players are stepping up efforts in domestic market in view of steady revenue growth opportunities and relatively high margins. Scale up of operations in emerging generic markets, outsourcing of R&D and recovery in CRAMS would add to the growth momentum.
Results - A snapshot: During the quarter, our pharma universe posted a robust set of numbers with top-line growth of 34.1% y-o-y and OPM at 23.5% (up 300bp y-o-y), however, the adjusted PAT declined 11.2% y-o-y. The export business (up 47.9% y-o-y; largely owing to US, which grew 90.7% y-o-y) continued its growth momentum, while, the domestic business (up 15.8% y-o-y) showed signs of sustained growth momentum. Though Sun, Lupin and Ranbaxy continued to contribute mostly (FTF / one time sales) in US, improvement on base performance front was witnessed in Unichem, Cadila and Glenmark. The domestic camp was supported by strong growth from Cadila, Cipla, Dr Reddy’s, Glenmark, Ipca, Lupin and Unichem Labs.
- In-line: Dr Reddy’s, Glenmark, Ipca, Lupin, Strides Arcolab, Torrent, Unichem Labs, Vivimed Labs
- Above estimates: Cadila, Cipla, Divi’s Labs, JB Chemicals, Opto Circuits, Sun Pharma
- Below estimates: Aurobindo, Ranbaxy
Outlook: Going forward, the high growth momentum is expected to be unsustainable and that it might taper off, as fewer drugs would be up for patent expiry. Thus, Reliance Securities' prefer stocks with differentiated products and ANDA pipeline coupled with clear growth strategy in place. Strategic tie ups, outlicensing deals and exclusive product launches could result in significant incremental profitability and could surprise positively going in FY2013-14. Moreover, Indian players are stepping up efforts in domestic market in view of steady revenue growth opportunities and relatively high margins. Scale up of operations in emerging generic markets, outsourcing of R&D and recovery in CRAMS would add to the growth momentum.
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