Mumbai: Mid-cap Indian drugmakers are likely to post healthy quarterly earnings on rising sales across geographies but a strong rupee against the dollar through two-third of April-June period might shave off margins for some.
The Indian rupee touched a 19-month high in mid-April before closing at 46.45 on 30 June, down 5.13% from its mid-April high of 44.18 against the dollar.
Cadila Healthcare, Glenmark Pharmaceuticals, Lupin and Piramal Healthcare , which rely heavily on domestic formulations and contract research and manufacturing services (CRAMS), are seen posting strong profits on rising sales and new drug launches, analysts said.
While rival firms like Aurobindo Pharma, Aventis Pharma and Jubilant Organosys, for which US generics market is a growth driver, might report a slight dip in net profit, they said.
A Reuters’ poll of 14 brokerages forecast four of the 10 mid-cap drug firms for which estimates are available, seen posting a dip in net profit in April-June.
“Profits for some of the companies would be under pressure due to the rupee appreciation, but otherwise, mid-cap firms are likely to post stable or strong numbers,” Sushant Dalmia, analyst, Angel Broking said.
Volume growth from various geographies and a number of US FDA approvals would also help boost profits, he added.
“Export-focused players would be impacted due to rupee appreciation -- but only to a certain extent,” another analyst with a Mumbai-based brokerage said.
“Volumes are growing and they would continue to growth for at least three years from now.”
Indian drugmakers are expected to report a top-line growth of 12.8% with an EBITDA growth of 20.5%, Motilal Oswal Securities said in a research note.
Mid-cap players like Divi’s Labs and Lupin would post strong EBITDA margins, primarily due to a low base, it added.
Lupin, Piramal and Glenmark, which together draw about 60% of revenue from domestic and non-US markets, are expected to report better margins in the quarter, the note added.
While Aurobindo Pharma and Aventis Pharma, who rely heavily on generics, are expected to see currency fluctuations dent margins by 1-1.5%, a pharma analyst with a Mumbai-based brokerage said.
“We are likely to see some forex losses in case of most pharmaceutical companies considering the sequential depreciation of rupee,” a research note by CLSA said.
Cadila Healthcare, although it has substantial US exposure, would post strong margins due to the low-base effect, the note added.