Except for Cipla and Glaxo which are impacted more by the slowdown in the domestic market, analysts expect an improvement in sales and EBITDA quarter-on-quarter for other pharma companies in the industry, says Nomura in its research note
The growth in the India pharmaceutical market is adversely impacted by trade
destocking. Though Dr Reddy’s has benefitted from a lower base in the previous quarter (the increase in sales towards the end of Q1FY14 due to the resolution of agitation by chemists in Maharashtra was accounted for fully in Q1FY14 numbers), the ongoing tussle between the trade and pharmaceutical companies regarding trade margins is likely to impact the growth adversely, according to Nomura Equity Research in its note on the pharmaceutical industry performance. Analysts accordingly factor in -3% growth in the industry. There is also a drop in prices as per the new pricing policy.
The key characteristics of the quarterly performance of the pharmaceutical industry are: a) a slowdown in the domestic formulation business due to the implementation of the new pricing policy and tussle with the trade on margins; b) key high value launches in the quarter, particularly by Dr Reddy’s and Sun Pharma; and c) rupee depreciation against key export currencies, points out the Nomura research note.
Except for Cipla and Glaxo which are impacted more by the slowdown in the domestic market, Nomura analysts expect an improvement in sales and EBITDA quarter-on-quarter for other pharma companies.
Nomura analysts expect the industry to record a consolidated revenue growth of 14.4% and EBITDA growth of 15.5% in 2QFY14F.
In its overall analysis of all companies in the sector, the research note says that medium-term growth drivers that include the US and India opportunities are intact for the sector. Further, rupee depreciation presents additional tailwind, concludes Nomura.
The Nomura research note estimates for the sector are given in the table below:
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