Mumbai / New Delhi: Overseas sales of generic medicines, improved operating performances and a modestly rising rupee would see most of India’s top drug makers post strong growth in the three months ended 31 December.
A Mint poll of four brokerages shows that the pharmaceutical industry is expected to show a 14-20% growth in sales revenue and 13-31% growth in net profit compared with the year-ago quarter.
Graphic: Yogesh Kumar / Mint
India’s Rs90,000 crore drug industry, dominated by off-patent drug makers, sells more than one-third of its production in the international market.
Since the rupee did not appreciate significantly against the dollar in the December quarter, companies whose overseas sales make a large contribution to revenues would be able to book profits, the brokerages said.
Pharma firms have been also focusing on cost and operating efficiency in the third quarter and could thus improve profits across markets, the broking houses said.
Saion Mukherjee, a sector analyst with Nomura Financial Advisory and Securities (India) Ltd, said in his report released last week that the growth of pharmaceutical companies during the quarter was likely to be driven by product-specific opportunities with low competition in the US, lower revenue base in the local market, and the high foreign exchange losses booked in the September quarter.
“We believe that there is strong growth likely for Lupin and Piramal Healthcare Ltd (on these grounds).
While Ranbaxy is expected to post a strong set of numbers on the back of its Valtrex launch, Dr Reddy’s is expected to report a decline on a slowdown in earnings momentum,” he said in the report.
Ranbaxy Laboratories Ltd, Sun Pharmaceutical Industries Ltd and Lupin Ltd had exclusive launches of their generic formulations in the US market during the December quarter.
But a high base of similar revenue in the year-ago period by the launch of its migraine drug Imitrex and a product recall in the US market this quarter would impact the earnings of Dr Reddy’s Laboratories Ltd, the Nomura report said.
Centrum Broking Pvt. Ltd estimates that pharma companies that cater mainly to the local market would report good third quarter results.
Revenues of companies involved in contract research and manufacturing services, which had been impacted by the recent economic slowdown, are expected to stabilize and in some instances show growth, said Centrum analyst Sriram Rathi.
He predicted that the generic drug exports from India were expected to grow at about 15-20% on the back of patent expiries and new product launches. At the same time, “we don’t expect any serious impact on exchange gain or loss as currency remained more or less steady during the quarter,” Rathi said in his report.
IDFC-SSKI Securities Ltd predicts an average sales growth of 13% in the sector, while a sales drop is predicted for companies such as Aventis Pharma Ltd, Dishman Pharmaceuticals Ltd and Dr Reddy’s.
The IDFC-SSKI report said the impact on these three companies are specific to them as Dr Reddy’s expect a significant decline in reported numbers due to a high base effect, and Dishman’s expected earnings will be impacted by a drop in sales in emerging markets.
Motilal Oswal predicts an average growth of 14.2% in sales and 25% in net profit for the sector during the third quarter.
The brokerage’s sector analyst Nimish Desai also predicts a drop in sales and net profit for Dr Reddy’s due to a high base in the preceding quarter and Aventis Pharma due to a loss of selling rights for its top selling product Rabipur, India’s top selling anti-rabies vaccine.
Aventis lost the marketing right of Rabipur after its original owner transferred it to Novartis India Ltd in early 2009.