Pharma Cos Q3 Sales Growth to Be 26% - The New Indian Express

Pharma Cos Q3 Sales Growth to Be 26%

Published: 13th January 2014 06:00 AM

Last Updated: 13th January 2014 01:34 AM

The pharma sector may witness a sales growth of 26 per cent during the third quarter of FY14, according to Bank of America Merrill Lynch (BoA-ML).

The research firm said it expects strong base business growth at companies such as Sun Pharma, Dr Reddy’s, Lupin and Aurobindo Pharma due to increasing number of limited-competition products, which renders higher sustainable growth.

“We expect growth momentum for the pharma universe to sustain with core sales growth of 26%, EBITDA growth of 37% and PAT growth of 40%. Revenue growth will largely be driven by continued momentum in the US, strong growth in RoW markets, higher currency realisation (up 14% YoY), and strong margin traction will drive bottom line growth in Q3.”  it said.

On the domestic front, after two quarters of dismal performance due to trade channel disturbances, there’s some recovery in volume with double-digit growth for the quarter. “Core EBITDA margins are likely to expand by 180 bps to 23.8%, driven by higher contribution from niche launches, improved product mix, and currency benefits,” it said.

According to BoA-ML, while a price cut on NLEM (National List of Essential Medicines) products is likely to impact margins in the domestic business, most firms  have already hiked prices on non-NLEM products and hence margin compression will be limited to a few large affected players, said Manoj Garg, Research Analyst, DSP Merrill Lynch (India).

“We see continued accretion from limited competition/complex products including Lipodox and Doxycycline of Sun Pharma, Tricor and Zymaxid of Lupin, Vidaza, and Dacogen of Dr Reddy’s. We believe incremental launches in niche segments will continue to drive growth in the ensuing quarters,” it said.

“Despite low contribution from domestic market, we expect core operating margins to expand by 180 bps to 23.8 per cent, led by higher contribution from niche launches, improved business mix, and favourable currency. We see strong margin expansion for Dr Reddy’s (up 300 basis points year-on-year),” Garg said.

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