Indian pharmaceutical companies' December quarter earnings were mixed.
Overall, there was moderate growth in earnings and aggregate EBITDA on a year-over-year basis. While sales in the US markets grew healthy, the domestic formulation saw a decent increase.
brokerage firm Motilal Oswal Financial Services It noted that December quarter earnings for the pharmaceutical companies under its coverage were in line with expectations.
"After reaching a low point in terms of year-on-year (YoY) growth in sales, EBITDA and profit after tax (PAT) for our coverage universe in FY22, the nine months of fiscal 2022-23 (9MFY23) have witnessed a healthy pick-up in financial performance year-over-year," said Motilal Oswal.
Motilal Oswal said that sales of pharmaceutical companies under his coverage universe grew 11.8% year-over-year, while EBITDA grew 11% year-over-year and PAT increased 4.7% year-over-year for the year. 3QFY23.
Helped by new launches and better marketing efforts, key geographies (US/India) posted better growth momentum for the quarter, Motilal Oswal noted.
According to Motilal Oswal's estimates, US sales grew 12.3% year-over-year, while sales of domestic formulas increased 8% year-over-year in the third quarter of fiscal 23.
However, high operating costs and interest payments affected its performance to some extent.
"Of the 20 companies, five had beaten our earnings estimates, while nine had missed our estimates. Specifically, Dr Reddy's Laboratories, Alkem Laboratories, and Alembic Pharmaceuticals outperformed by a wide margin. By contrast, Divi's Laboratories, Gland Pharma, and Lupine missed our estimates materially," said Motilal Oswal.
Under Motilal Oswal's cover, 11 companies saw earnings decline, while seven saw earnings improvements.
"The maximum declines in FY23/FY24/FY25 earnings were seen at Lupine (41 percent/6 percent/5 percent), Divi's Labs (21 percent/33 percent/24 percent) and Biocon (22 percent/6 percent/4 percent) By contrast, Zydus Lifesciences (11 percent/11.5 percent/9 percent) and Dr Reddy's Laboratories (12 percent/5 percent/5 percent) were witnesses maximum improvements in earnings estimates, respectively," said Motilal Oswal.
Sun Pharma and Apollo Hospitals Enterprise are Motilal Oswal Financial Services' top picks in the pharmaceutical and healthcare segment.
another brokerage firm Nuvama Wealth Management noted that the pharmaceutical sector, on a year-over-year basis, posted 11% growth in sales and 9% growth in EBITDA in the third quarter of fiscal 2023.
The brokerage said that, except for Sun Pharma and Lupin, which are the most affected by the expiration of licensed drug patents, business in the pharmaceutical sector in India remained stable.
"Most companies reported 10-12 percent growth (excluding covid). US benefited from gRevlimid (Dr Reddy's Laboratories, Cipla, Zydus) and seasonality (Lupin, Alkem, Ajanta Pharma, Zydus) "That is likely to ease in our view. That being said, volumes are improving and price erosion is leveling off, which could benefit companies like Aurobindo Pharma," Nuvama said.
The brokerage noted that NSE Pharma is trading 22 times a year, representing an 8 percent premium to Nifty, down from its 10-year historical average of nearly 34 percent.
"This quarter saw a consensus earnings per share cut of 4 percent and 3 percent for FY24 and FY25, respectively. Lupine, Ipca, Divis and Biocon saw maximum earnings cut. Zydus (strong results) and Dr Reddy's Laboratories (gRevlimid) saw an increase in earnings, - said Nuvama.
The brokerage house believes that the days ahead may be better for the sector due to higher operating expenses and various other factors.
"Pharmaceutical companies are allocating more capital to branded businesses (eg Ipca, Sun Pharma, Lupin, Ajanta Pharma, Torrent Pharmaceuticals), ensuring double-digit growth. US price erosion. "seems to have stabilized as players retire and volumes increase with inventory depletion. Revenue growth has kept pace with rising operating expenses and inflationary pressures appear to recede," Nuvama said.
The brokerage firm said some players like Aurobindo Pharma and Dr Reddy's Laboratories will benefit from regulatory action against competitors.
Sun Pharma and Alkem are Nuvama Wealth's top picks in the industry.
Disclaimer: The opinions and recommendations given in this article are those of the brokerage firms. These do not represent the views of MintGenie.
Nifty earnings growth prospects
First Post: February 21, 2023, 1:38 PM IS
