Pharma stocks in the spotlight: Shares of pharmaceutical companies were in demand on Monday, with Astrazeneca Pharma India, Glenmark Pharmaceuticals, Divi's Laboratories and Torrent Pharmaceuticals rising over 5 per cent on the BSE in intra-day trade, in an otherwise subdued market, after the sector will report a healthy quarter in March. (Q4FY24) earnings.
In comparison, the S&P BSE Sensex rose 0.09 per cent to 75,480 at 10:00 am
Among individual stocks, Torrent Pharma share price hit a new high of Rs 2,839.90, rising 9 percent in intraday trade after the company reported a sharp year-on-year (YoY) rise of 56 percent in profit after tax (PAT) at Rs 449 crore. Earnings before interest, taxes, depreciation and amortization (Ebitda) margins expanded 298 basis points to 32.2 percent. Revenue grew 10 percent year-on-year to Rs 2,745 crore, driven primarily by growth in India, Brazil and other emerging markets.
The results of the India and Brazil brand businesses (together representing ~73 percent of sales) continue to have a strong correlation with the company's margins (GPM and EBITDAM). India continues to perform well, focusing on powerful brands in addition to the foray into consumer businesses. Brazil's numbers were boosted by the planned focus on branded generics and field force expansion.
"In Germany, volatility has reduced due to normality in tender allocation. US continues to weigh negatively due to lack of new launches but situation will improve in FY25 as Dahej received EIR from USFDA last year. Management expects margin "improvement momentum (50-100 basis points each year) will persist, as in addition to the branded generics markets in India and Brazil, the future looks much brighter for the generics markets of Germany and now also the US," ICICI Securities said in a note.
"With field force expansion, new launches and market share gains in existing products, Torrent Pharma continues to exhibit superior growth in the branded generic segment in domestic formulation (DF) and LATAM. With regulatory issues behind , TRP is expected to improve growth prospects in the US generics segment on the back of further approvals and subsequent launches,โ Motilal Oswal Financial Services (MOFSL) said in the results update.
Meanwhile, Glenmark Pharma also hit a 52-week high of Rs 1,123, rising 8 per cent on the back of a five-fold increase in average trading volume. The company reported a healthy 27 per cent year-on-year growth in Ebitda at Rs 504 crore and margins stood at 16.5 per cent in Q4FY24. Revenue, however, grew by only 2 percent to Rs 3,063 crore, as decent growth in India and the rest of the world was offset by weak sales in the United States.
"The past year has been a period of significant transition and transformation for Glenmark. The company successfully sold a majority stake in Glenmark Life Sciences, concluding the year with a strong net positive cash position. The company's branded markets continued to generate "solid growth, particularly in Europe and other key international markets. While we encountered some headwinds in our US business, we remain optimistic about the ability to regain our growth trajectory in the coming year," management said.
The company continues to reorganize business segments and geographies to optimize margins and maintain a secular growth trajectory. It has addressed legacy debt issues by recently demerging GLS stake and is now looking to restructure existing businesses, ICICI Securities said in a note.
Shares of Divi's Lab also hit a 52-week high of Rs 4,356.85 as it rose 6 per cent in intra-day trade after it reported 50 per cent year-on-year growth in Ebitda at Rs 731 crore and a Margins improved by 675 basis points to 31.7 percent in Q4FY24.
The company's profit after tax (PAT) rose 69 per cent year-on-year to Rs 538 crore. Revenue rose 18 per cent year-on-year to Rs 2,303 crore, primarily driven by 47 per cent growth in Custom Synthesis (CS) to Rs 1,175 crore and 25 per cent growth in Nutraceuticals to Rs 188 crore .
Divi delivered a strong profit advance in Q4FY24, driven by a revival of the CS business. Better sales growth also drove better profitability for the quarter. That said, FY24 would be the second consecutive year of year-on-year decline in profits, albeit at a lower intensity, with better traction in the CS business for the quarter, MOFSL said.
"The company has made great strides in the CS and API segments thanks to a strong chemical skill set. It is not only preparing to supply APIs once they are off patent, but is also working on backward integration to gain market share/maintain profitability in existing API portfolio Divi continues to improve services in the CDMO segment during the product development and manufacturing stages,โ the brokerage firm said in a results update. However, it reiterates a 'Neutral' rating on the stock with a target price of Rs 3,900.
Going forward, India Ratings and Research (Ind-Ra) expects US-focused pharma companies to maintain their revenue improvement trend in FY25 due to increased shortage of drugs in the US market. This will not only provide potential for volume growth but also limit price erosion to single digits over the next 12-18 months, leading to better returns.
โFurthermore, given the limited Abbreviated Original New Drug Applications (ANDAs) and delays in approvals provided by the USFDA, the drug shortage in the US provides an opportunity for Indian players with the necessary approvals to gain share. in a competitive but attractive market," said Ind-Ra.
First published: May 27, 2024 | 11:35 a.m. IS
