IndiaNivesh Pharma Sector Review July 2014

Coverage Pharma Universe to maintain the growth momentum, we expect revenue growth of 24.1% y-o-y in Q1FY15E

Robust performance of Indian Pharma companies is likely to continue in the current quarter also. Companies under INSPL Pharma Coverage Universe are expected to grow at healthy rate of 24.1% y-o-y in Q1FY15E. Revenue growth in domestic market is likely to revive on sequential basis from 12.7% in the previous quarter to 13.5% in
the current quarter. US market is expected to maintain robust growth & likely to grow 39.2% y-o-y in Q1FY15E. We expect RoW market to report healthy growth. Among the pack, highest growth is likely to be from Aurobindo (+65%), followed by Shilpa Medicare (54%),Torrent Pharma (+33%). Among the universe, Jubilant is likely to report lowest growth of only 11% y-o-y.

EBITDA margins likely to expand ~169 bps y-o-y (lower ~100 bps sequentially) :

Due to INR depreciation, batter pricing scenario for raw material & favorable operating leverage, EBITDA margin of INSPL Pharma universe is expected to expand ~169 bps y-o-y to 25% level in Q1FY15E. On sequential basis EBITDA margins may contract ~100 bps. We expect, cumulative EBITDA to grow 33.1% y-o-y (decline 1% sequentially) in Q1FY15E. Adj Net Profit (adj for exceptional items & forex losses) is expected to grow 26.7% y-o-y (decline 6.4% q-o-q).

Domestic market growth is likely to revive sequentially. On account of normalization in implementation of new pricing policy, we expect INSPL Pharma Universe’s domestic growth to improve sequentially to 13.5% y-o-y in Q1FY15E compared to 12.7% in Q4FY14. In our coverage universe, Sun, Glenmark & Ipca are likely to be top performer in domestic market.

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