The pharmaceuticals sector is expected to post a revenue growth of around 13.5 per cent and a net profit growth of 30.3 per cent for the third quarter of 2023-24 (FY24), riding on the approval for niche drugs in the US market, fall in raw material prices and correction in shipping rates.
In the healthcare segment, hospitals are expected to post revenue growth of 13 per cent during the coverage, while net profit growth would be around 37 per cent, ICICI Securities said in a note.
However, the performance may not be comparable on a sequential basis due to the offset of the festive season in Q3FY24, the analysts noted.
Diagnostic companies are likely to report 12 per cent revenue growth and 37 per cent growth in profit after tax (PAT).
Axis Securities said that the major growth will be driven by generic products like generic Revilmid, generic Spiriva, generic Albuterol, generic Prezista, generic Lenotirade and biosimilars.
The US market is expected to witness a mid-teen growth with stable pricing and the India business has now stabilised after Covid-19 with low double-digit business growth.
Single-digit revenue growth may be observed in Europe and the international market in Q3FY24, Axis Securities said.
The US aggregate revenue is expected to grow by 15 per cent year-on-year (Y-o-Y) despite low single-digit price erosion in the industry, which was only partially offset by the launch of new products.
Nirmal Bang Institutional Equities felt US growth would be around 10 per cent in constant currency terms but new launches will remain almost flat to negative on a quarter-on-quarter (Q-o-Q) basis.
Margins are expected to improve Y-o-Y on the back of a better product mix, price hike benefits in branded markets and normalising cost inflation.
Also, diminishing US pricing pressure will support margins, Nirmal Bang said in a report.
Also, raw material price softening is supporting US growth.
Growth in the domestic formulations market would moderate to 9 per cent even as new launches and price hikes provide support, Nirmal Bang said.
Axis Securities said the Indian pharma market (IPM) delivered a strong growth of 10 per cent in Q3FY24.
It was led by a strong growth in acute therapies (anti-malarial and dengue), immunomodulators, anti-infectives and gastro-intestinal therapies.
Buoyed by improved field force productivity in most companies, price hikes, and new launches, we continue to bake in a 10-11 percent organic domestic sales growth in FY24 for our coverage, Axis Securities said.
The good news is that the price index of active pharma ingredients (APIs), which comprises top 15 APIs imported from China (mainly used as raw material by pharma companies), indicates aggregate fall of 13 per cent Q-o-Q and 12 per cent Y-o-Y.
This fall in API prices was led by the stabilisation of production in China and increased supply availability in India due to the production-linked incentive (PLI) scheme, the brokerage said.
Similarly, crude prices and shipping rates in Q3FY24 have corrected from the peak, and may improve the profitability of pharma companies, moving forward.
The above factors may improve pharma companies aggregate Q3FY24 Ebitda margins by 200 basis points (bps) on a Y-o-Y basis, it said.
Among corporates, Abbott is expected to report a 10 per cent revenue growth, led by growth in hormones and gastrointestinal segments.
Dr Reddy's Laboratories will gain from generic Revlimid sales in the US ($100 million), but would have a flattish growth in US sales Q-o-Q.
Cipla is gaining market share in generic Brovana, while it maintains a stable share in generic Albuterol.
Lupin is likely to post an overall 15.7 per cent growth in Q3FY24, albeit lower by 1 per cent Q-o-Q.
Nirmal Bang said that among large-caps, Sun Pharma, Cipla and Torrent are expected to report over 12 per cent growth.
Among mid and smallcaps, Eris Lifesciences and JB Chemicals and Pharmaceuticals are expected to post strong double-digit growth in revenues Y-o-Y.
Among the MNCs, Sanofi is expected to report 12 per cent revenue growth in spite of divestment of brands with Y-o-Y margin improvement while Pfizer is expected to report a weak quarter.
This is owing to divestment of Upjohn business and slow growth in acute-heavy portfolio, the brokerage added.
As for the hospitals sector, analysts felt that on a sequential basis, the Ebitda margin may dip 50 bps due to pressure from ancillary business and new bed additions.
Apollo may grow the fastest among the pack.
Apollo is likely to register an Ebitda growth of 17 per cent Y-o-Y, driven by its hospital business and a turnaround in its online pharmacy business, ICICI Securities said.
Dr Lal Pathlabs is likely to report a 14 per cent Y-o-Y surge in revenue.
It is now expanding across Tier-3 cities and the north, south and western regions.
Metropolis may report a 3 per cent Y-o-Y rise in revenue due to discontinuation of tender business.
The company plans to add 600-800 collection centres and 50 hi-tech centres in FY24.
