Brokerages say that the pharma sector that has usually been one of the better performers, is under various pressures of cost and competition which are expected to affect margins
The pharmaceuticals business is among the sectors that are expected to do well in the first quarter of 2010-11, due to its characteristic resilience to inflationary pressure and higher interest rates that have caused an economic slowdown. In fact, the group of pharma companies has outperformed the benchmark Sensex significantly in the three-month period.
But the sector has some drawbacks, with companies like Dr Reddy's and Aurobindo Pharma joining Ranbaxy, Lupin and Sun Pharma on the warning list of the US Food and Drug Administration (USFDA). Other factors like product mix, operational performance and ramp-up of capacity will likely produce mixed results, according to analysts' expectations.
The brokerages consensus for the pharma sector is a 19% year-on-year top-line growth, a touch lower though from preceding quarters. However, according to Angel Broking, margins would decline by 110 basis points, which along with increased tax outgo would lead to flat growth in net profit.
While the benchmark Sensex lost 3% in the quarter from 1 April 2011 to 30 June 2011, the Moneylife Pharma Index, which comprises of 75 companies, rose by a good 8%.
Angel estimates that among the large drug producers Sun Pharma could post a sales growth of over 35% y-o-y mainly on its acquisition of Taro. It expects Cipla to post net sales growth of 15.5% y-o-y. Net sales for Dr Reddy's are projected to grow by 10%, Lupin by 17% and Cadila by 20.5%.
Amongst the small caps, Indoco Remedies is expected to post 21% y-o-y growth, whereas in the pack of multinationals, Aventis is likely to achieve 25% y-o-y growth in net profit, led by 10.3% y-o-y sales growth. The projected Rs53 crore profit estimate is on a low profit base in the previous year 2010-11.
Analysts at KR Choksey say the domestic formulations business will show robust growth of 15%-16% y-o-y driven by new product launches and significant advance into tier II & III cities as well as the rural market. They believe that overall margins would be under pressure due to expansion of the field force, regulatory filings (Para IV/ANDAs (Abbreviated New Drug Application)/DMF (Drug Master File)), pricing pressures in the US due to increase in competition and capacity addition.
According to Motilal Oswal, Sun Pharma, Ranbaxy and Divi's Lab would drive top-line growth in the first quarter of 2011-12 by about 16.3% y-o-y (excluding one-offs). Adjusted profit after tax (PAT) is expected to grow by 7.9% y-o-y. Sun Pharma, due to its Taro acquisition, Ranbaxy, on a low base, and Divi's Lab, from a recovery in business, will lead earnings growth.
But PAT growth of CRAMS (Contract Research and Manufacturing Service) companies like Strides Arcolab and Biocon (excluding Divi's Labs) will be affected.
According to ICICI Direct, pharma companies under its coverage are expected to post mixed results. Sun Pharma's numbers are not comparable due to consolidation of Taro's numbers and also due to discontinuance of anti-ulcerant Protonix and anti-cancer Eloxatin in the US market. Similarly, the results of Opto Circuits, Elder Pharma and Biocon are also not comparable as Opto acquired US-based Cardiac Science, Elder acquired Bulgaria based Biomeda and Biocon sold a stake in Axicorp.
Companies like Aurobindo, Cadila, Glenmark, Indoco, Lupin and Torrent Pharma are expected to report good y-o-y sales growth due to new launches and increase in field force. Cadila and Lupin are expected to lead the pack with about 20% sales growth. Unichem Laboratories is expected to report marginal growth in sales due to a change in the distribution pattern.
While healthy growth in domestic formulations sales coupled with good growth in the US market will drive the numbers, growth will be arrested by the absence of F2F products for Sun and Glenmark.
ICICI Direct also estimates a first quarter sales growth of 19% y-o-y to Rs9,819 crore, whereas PAT is expected to see marginal growth of about 1% y-o-y to Rs1,558 crore on a high base. It expects Glenmark, IPCA and Lupin to lead the pack.
Also, during the quarter, Sun Pharma signed a partnership with MSD (Merck Sharpe & Dohme) to market, promote and distribute MSD's diabetes products under different brand names in India. MSD would provide the scientific excellence and market success of the product to the partnership, while Sun Pharma would bring in its proven success and expertise in the marketing of drugs in the relevant therapeutic areas across India.
The TV commercial for a new range of ‘High Tech Self Energised’ watches appears like a crazy scientific experiment gone wrong
Titan has launched a brand new range of watches called HTSE. This apparently stands for 'High Tech Self Energised'. Quite a mouthful, that. Can't imagine going to a Titan showroom and asking for HTSE. Most likely I'll end up asking for HSBC. It would have been sensible to coin a pithy, sharp name for the range.
Anyways, what's special about an HTSE watch is that it can be charged by a light source. This would kill the need for constant battery replacements. And Titan has, as expected, used actor Aamir Khan, their brand ambassador, to do the honours in the commercial.
But the ad leaves you pretty confused and disinterested. Because it's a convoluted story. Aamir bhai (sporting the rich moustache he's grown for his next flick) surreptitiously goes about stealing electricity from different light sources. Table lamp, car tail light, candles, mobile phone, etc. And he stores this 'white liquid energy' (that's the way it's been strangely picturised) into a bottle. Khan then stores all this chemical stuff in a bottle. Later, he transfers this energy into a box containing the Titan HTSE watch. Which helps it get charged.
I suppose the creative strategy is to create some sort of intrigue and aura around the watch. But the problem with this treatment is that even if you get a bit curious on first exposure, repeat exposures leave you sleepy, despite all the light sources featured in the commercial.
With a talented actor like Aamir on the payroll, what was the need to create such a twisted tale? Where was the need for light energy being transferred into bottles, stored, and then injected into the watch? All this pseudo scientific nonsense makes the commercial appear like a laboratory experiment rather than a sci-fi thriller (which might have been the original intent).
To my mind, charming, humorous commercials can be made with a watch that feeds on light. A task made easy with the actor already in the house.
Well, all I can say is that it's a crazy scientific experiment gone wrong. Back to square one.
No doubt, it's an innovative product, and should catch the gizmo obsessed youth's imagination. But first, the advertising needs to catch their fancy. Also, while they re-do things, might be a good idea to find an energetic brand name as well. I certainly shan't be able to recall HTSE. Even if I go drunk on electrolytes.
Manufacturing in May grows by just 5.6%, mining a poor 1.4%; factory output for April revised downward to 5.7% from earlier 6.3%
New Delhi: The country's industrial growth fell to 5.6% in May this year, the slowest in nine months, from 8.5% in the period a year ago, mainly due to poor performance of the manufacturing and mining sectors.
Factory output in April, as measured in terms of the Index of Industrial Production (IIP), has also been revised downward to 5.7% from the earlier estimate of 6.3%, as per the new series with a base year of 2004-05.
According to data announced by the government today, industrial growth in April-May this year averaged 5.7%, compared to 10.8% in the corresponding period last year.
The latest data is further confirmation that high inflation and a tight monetary policy by the Reserve Bank of India are putting the brakes on the economic. But with inflation hovering at about 9%, it is widely expected that the RBI will hike rates further this month, which would be the 11th increase since March 2010. The recent rise in fuel prices is also expected to push inflation up further.
The stock market slipped further in afternoon trade after the release of the IIP data. Both the benchmark Nifty and the Sensex were down by nearly 2% at about 1.30pm.
The manufacturing sector, which accounts for over 75% of the total weight of the index, grew by just 5.6% in May 2011, as against 8.9% in the month last year. Similarly, the mining sector grew by a meagre 1.4% as against 7.9% last year.
Another area of concern was the poor off-take of capital goods, which grew by just 5.9% in the period under review, compared to 15.8% in the previous corresponding period. Thee growth in output of intermediate goods also registered a sharp decline to 0.9% in May from 11.7% in the year-ago period.
Overall, consumer goods saw lower growth of 5.4% as compared to 7.4% in May last year.
The IIP performance for May is even worse as per the old series of index, with a base year of 1993-94, which comes out at 3.6% as against 12.2% in the period last year. The new series with a 2004-05 base was introduced in April.