'Pharma cos may post better results in Q2 on local biz growth'

Indian pharmaceutical companies are expected to post better results in the second quarter of the current fiscal, following recovery in the domestic business and several launches in the US market, a report says.

"Unlike the last two quarters, the Indian pharma sector will witness some relief in Q2 FY18, largely led by certain one-off factors. Channel re-stocking will help many companies in the India branded business and a couple of significant launches in the US market will provide a further boost," HDFC Securities analyst Amey Chalke said in its report here.

We foresee a 15 per cent sequential jump in revenues, and the EBITDA margin to move up to 22 per cent from 18 per cent quarter on quarter. On a year-on-year basis, we expect single-digit top-line growth. H2 FY18 is again likely to be soft, with no visibility on resolution of the FDA issues of large companies like Sun Pharma and Dr Reddy's Labs, Chalke said.

Sun Pharma's top-line is likely to decline 15 per cent, owing to increasing pressure on Taro's business and a lack of generic launches to offset pricing pressure in the base business. Domestic business is however likely to post strong growth, given channel re-stocking. The EBITDA margin may show some sequential improvement on the back of a better business mix.

The Halol resolution and the specialty business remain key triggers for Sun Pharma post Q2 in the current fiscal.

However, any further delay in the resolution and a negative outlook for the specialty business may lead to significant earnings cuts for FY19/FY20, as Taro's business continues to erode, he said.

Similarly, Dr Reddy's Labs fate is tied to key product launches in H2 FY18, like gCopaxone and gNuvaring. However, further negative regulatory developments at Duvvada and Bachupally units will suppress any recovery, he added.

With a domestic heavy portfolio, Cipla is likely to post better numbers in Q2 FY18, largely on account of channel re-stocking. We foresee 7 per cent top-line growth in the said quarter. EBITDA margin will expand to 19.5 per cent owing to a favourable business mix during the quarter.

Pharma major Lupin is also likely to post 4 per cent revenue growth sequentially. Recovery in the domestic business will be a significant contributor to this, the report said.

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