Local pharma majors to post strong growth

Indian pharmaceutical companies are projected to post moderate to strong growth in sales and profits in the quarter ended March this year, even as multinational firms are expected to post subdued performance for one more quarter.

According to various research reports on fourth quarter expectations, the Indian firms are projected to post a robust 50 per cent growth in profits and 25 per cent rise in net profit in the fourth quarter ended March 2007. The MNCs are likely to grow single digit during the period.

Most companies expect to replicate the strong growth momentum in the domestic formulations business, driven by volume growth and new product launches, including line extensions. The improvement in efficiencies and better cost management are likely to be the key factors for the sector to bounce back on the growth track. 

Q4 EXPECTATIONS: GROWTH RATE IN %
	Ranbaxy		Dr Reddy's Labs		Cipla
	Sales	Profit	Sales	Profit*	Sales	Profit
Motilal Oswal	18.70	74.40	56.00	87.80	13.20	2.40
JM Morgan	21.20	117.30	89.70	251.90	10.20	12.90
Merrill Lynch	16.70	87.30	41.30	189.00	6.70	1.40
ICICI Securities	24.20	36.60	93.60	212.20	23.40	22.20
* Net profit in Rs crore against net loss of Rs 23.2 crore

According to Kotak Securities, pharmaceuticals firms are expected to report an overall revenue growth of 22.7 per cent year-on-year, with a sharp jump in net profit by 40.2 per cent. Large cap stocks are expected to register a cumulative revenue growth of 19.4 per cent compared to 29.3 per cent expected by mid-cap stocks. Large cap stocks are also likely to report an overall growth of 37.6 per cent in net profit compared to 45 per cent expected from mid-cap stocks.

The average operating and net profit margins are expected to be around 19.8 per cent and 12.7 per cent, respectively, for the quarter. Analysts expect good growth in Ranbaxy, Dr Reddy's Labs, Lupin, Nicholas Piramal, Glenmark, Ipca Labs and Alembic.

ICICI Securities expects ten major pharmaceutical firms to record a strong 66 per cent surge in profit in the fourth quarter, driven by 32 per cent sales growth and increase in operating margins by 421 basis points. The key factors driving this growth are exclusive ANDAs, new launches, acquisitions, healthy growth in the domestic market and improved cost discipline.

The SSKI analysts are positive on the Indian pharmaceutical sector on account of the continued domestic growth, steady contributions from exports and synergies arising out of integration of acquisitions. Further, the increased focus on drug discovery and collaborative research with global players enhances medium-term earnings.

Motilal Oswal Research expects pharmaceutical firms to report sales growth of 24.6 per cent, driven by a 26 per cent sales growth for the big 3 generic companies and 28.7 per cent for other Indian companies. MNC firms are, meanwhile, expected to report sales growth of only two per cent, mainly due to divestment of consumer healthcare business of Pfizer and animal healthcare business of GSK Pharmaceuticals.

Merrill lynch expects the performance of generic players - Ranbaxy (profit growth of 87 per cent) and Dr Reddy's (Rs 190 crore profit against loss) - to be the strongest in the fourth quarter. Flat profit growth has been predicted for Cipla, noting high base effect and no new significant product upsides.