Mumbai: After the IT sector, it is the pharma sector that is expected to reap benefits of Covid induced business environment in their July-September quarter earnings.
Pharma sector's outlook for the second quarter earnings season is quite optimistic given domestic demand, new launches in the US markets and savings on regular expenditure due to Covid related restrictions like travelling, promotional and marketing costs, according to analysts.
“The pharma sector is expected to return better earnings traction for this quarter gaining from revival in the domestic market and new product launches in the US followed by recovery in some business segments. Promotional, marketing and travelling spends still continuing to be lower than the pre-covid levels companies are expected to deliver better EBITDA margins,” said Cyndrella Carvalho, analyst, Pharmaceuticals, Centrum Institutional Research.
“We expect the quarter growth to be in favour of Dr Reddy’s Laboratories (DRL), Cipla and Abbott. Except GSK pharma most of the companies are expected to deliver mid-single digit growth in the domestic market,” Centrum earnings outlook said.
“DRL would see full quarter consolidation of the Wockhardt brands. Cipla is driven by the Remdesevir and Tociluzumab and favipiravir along with the trade generics benefits. Abbott continues to reflect strong growth amid its lead core brands,” according to Centrum analyst.
US revenues are expected to show recovery along with better contribution from key launches.Indian pharma companies US business is expected to report 8 per cent year on year and 5 per cent quarter on quarter growth as a recovery over the previous quarter.
“We expect the injectable business recovery for Aurobindo Pharma, DRL and Sun Pharma, however, the derma space may continue to face some impact considering Taro. The gAlbuterol launch is expected to support Lupin along with gMetformin relaunch. Also the benefit of galbuterol launch is expected to continue for Cipla,” Centrum earnings outlook said.
Active pharmaceutical ingredient or APIs segment of the companies are expected to deliver strong sustained growth over the previous quarter.
The supply chain disruptions ( mainly from China) are expected to create a larger and better place for the Indian players.
“We look forward to the strong volume gains and sustained better pricing for most of the generic APIs,” Centrum earnings outlook said.
“We maintain our positive stance on the sector and remain optimistic about further earnings upward revision even in the earnings season,” Cyndrella Carvalho of Centrum Institutional Research said.
Outlook Comments By Top Pharma Players
Aurobindo Pharma- We look forward to debt repayment. We look forward to recovery in the injectable business along with better traction at Natrol and generics.
Biocon -The market share ramp-in pegfilgratim and trastuzumab along with Semglee launch. Look forward to better traction in small molecules business and APIs.
Cipla -US launch of gProventil approval expected to support the earnings in the quarter. India growth to be driven by Remdesivir and tocilizumab along with faviparavir and better trade generics performance continues.
Dr Reddy's Labs - New launches in the US to drive earnings along with gSuboxone. The Wockhardt brand acquisition would be consolidated fully this quarter in India.
GSK - For GSK the vaccines sales and recovery over the months continues however the impact of weak anti-infective seasons could be felt in this quarter.
Lupin - The launch of generic albuterol along with re-launch of gMetforin in the US would drive at least base sales in the US.
Domestic performance to drive margins better, anticipate base recovery from this quarter onwards.
Pfizer India - Becosules and Corex along with Minipress have shown strong traction in Q2. We await to see how the Vaccine segment is recovered.
Sanofi - The closure of Ankleshwar transaction would drive earnings. We expect mid-single digit growth and await more clarity on post export hive-off numbers.
Sun Pharma - The US market – speciality segment to see recovery while Taro to see continued impact of pandemic. Also hope to see better India and Row(return on wealth).
Aarti Drugs- Expected to benefit from API demand scenario and lower material costs along with strong demand growth and business dynamics.
Granules India - Expected to post better numbers as demand remains strong with 3 new launches in the quarter.
FDC- We expect the recovery and strong growth of the Electral brand to drive the domestic growth along with strong export growth.
Abbott -Given the sub chronic portfolio of the core brands and Insulin franchise should have high single digit top line growth with margin improvements.