Pharma - Q2FY13 Results Preview - Pharma policy likely to impact sector - Centrum

We expect the thirteen pharma companies under our coverage to post 22%YoY growth in revenues during the quarter due to good domestic growth and the benefit of forex gains. We expect Ranbaxy Labs (RLL) and Lupin to report revenue growth of 38%YoY and 34%YoY respectively due to good growth in the US market. We expect export oriented companies to report forex gains from 2.5% appreciation of rupee during the quarter. We expect these companies to report 24%YoY growth in EBIDTA and 40bps improvement in EBIDTA margin from 21.1% to 21.5%. We expect 50% YoY improvement in net profit due to margin improvement and MTM gains. Overall, pharma companies should report excellent performance for the quarter except for Sun Pharma where we expect flat net profit. However, the National Pharmaceutical Pricing Policy (NPPP) will have an adverse impact on the industry.

Good revenue growth: We expect revenue growth of pharma companies at 22% on a YoY basis, on the back of good growth in the US market and in the domestic market due to the launch of new products.

Improvement in EBITDA margin: We expect the EBITDA margin of our coverage companies to improve by 40bps from 21.1% to 21.5% due to good revenue growth in the US from existing products and new introductions. However, the depreciating rupee during the major part of the quarter adversely impacted imported raw material cost.

MTM gains due to currency fluctuations: We expect APL and RLL to report forex gains from MTM due to 2.5% appreciation of rupee during the quarter. However, these companies would have lower revenue growth.

Lupin and Wyeth remain our preferred picks in the space: Lupin and Wyeth continue to be our best picks in the sector on account of Lupin's improved performance across geographies and Wyeth's launch of Prevenar 13 for adult usage. Both these companies are likely to report good growth in the domestic market.

Source : Equity Bulls

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