Operating margins expected to grow by 28% year-on-year for Indian pharma firms

Published: 30-Jan-2015

Most are focusing on niche products in the US

Key launches in the US market by some of the large cap Indian firms and a rebound in the domestic market are set to offset the impact of the current devaluation. Analysts have said operating margins are expected to sustain around 28% year-on-year, with profit after tax expected to grow by 20%, driven by higher operating margins backed by key product launches by some Indian large cap companies.

Large caps, excluding Ranbaxy, are expected to cumulatively post a top line growth of 11% year-on-year. In midcap companies, Granules India is expected to register lower sales from Auctus, acquired in 2013, on account of a shutdown of its Vizag plant during cyclone Hudhud, for two weeks during the quarter.

Analysts also expect Unichem’s earnings to be affected by weak domestic business growth, on account of lower volume growth in its chronic portfolio. However, the company's export formulation is expected to show better performance.

Analysts expect revenues of Cipla to be driven by strong domestic growth, with Celebrex API supply to Teva expected to provide the necessary push. Lupin is also expected to clock strong revenue growth and stable margins, on account of a strong domestic market and the recent launch of Celebrex in the US market.

Analysts remain bullish on the pharmaceutical sector, as most are focusing on niche products in the US

Sun Pharma’s revenues would be mainly driven by strong domestic business. Analysts expect sales from Taro to be around US$230–$235m. However, market share loss in Doxycycline, Sumatriptan Auto injector and slower approvals are expected to have an impact on US growth.

Dr Reddy's is expected to post flat growth, owing to lower growth in the Russian market on account of the depreciation of the rouble. However, strong domestic growth and the recent launch of Valcyte might offset some of the impact.

Cadila’s performance is to be driven by increased traction in AG launches in the US market and a price hike taken on one of its products.

Analysts remain bullish on the pharmaceutical sector, as most are focusing on niche products in the US which are a low competition market, a rebound in the domestic market and ramp up in the emerging markets.

The Indian domestic market would continue to remain as a cash cow for almost all domestic leaders, led by 10 to 15 launches annually. Analysts have forecast strong outperformances on the back of unfolding regulated markets, with a focus on complex therapies like dermatology, injectables, transdermals and biosimilars by creating capacities and investment in research and development.

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