Pharma sector update - Geojit BNP Paribas Financial Services

* April – June 2012 appears to be yet another strong quarter to the pharma companies in our coverage universe.

* It appears that sales have increased 34% yoy and PAT has grown by 30% yoy in 1QFY13.

* Increase in sales and profitability are driven by favorable currency movements and increasing contributions from the US and India.

* Even though non-recurring product launches in the US will play a major role in 2Q, strong sales growth of 32% is expected in 2QFY13 and PAT is expected to grow at 24%.PAT growth is not keeping pace with sales growth mainly due to higher effective tax rate for the coverage universe.

* Margins in the base business of the coverage universe are expected to expand by 150 bps.

* 1QFY13 quarterly results hold significance to Cadila Healthcare, Cipla, Dr. Reddy's, Ranbaxy and Lupin.

* Top result 'buys' are Torrent Pharma (TP Rs.733), Glaxo Pharma (TP Rs.2430) and Dr. Reddy's (TP Rs.1803).

* Top 'sell' continues to be Ranbaxy and the target price is Rs.400.

* A small positive or negative development may lead to sharp stock price movement in the coverage universe.

Source : Equity Bulls

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