Q1 results preview: Niche US products, domestic growth may boost pharma biz

Brokerages expect aggregate sales growth of 11 per cent, and 21 per cent earnings growth during this period

Niche products in the US and steady growth in the Indian domestic market are expected to aid earnings growth for pharma players in the first quarter of the current financial year (Q1FY25), according to analysts.

Brokerages expect an aggregate sales growth of 11 per cent and 21 per cent earnings growth during the quarter. Hospitals are expected to post 13 per cent revenue growth with occupancy levels at 65-72 per cent. Analysts at Motilal Oswal said that domestic formulation sales were likely to grow by 10 per cent led by healthy growth in cardiac, gastro, and dermatology therapies that outperformed the market growth during the quarter. Chronic therapies which constitute 10 per cent of the pharma market grew by 10 per cent while acute therapies grew by 6 per cent. Acute therapies (drugs like antibiotics) constitute 62 per cent of the domestic market.

According to Nuvama, domestic revenue growth would be around 9-10 per cent. Most companies the brokerage covers would report double digit growth, except Cipla (5 per cent) due to a reset of trade generics, and Ipca (6 per cent) due to underperformance in pain and cardiac therapies. Natco Pharma is also likely to post a decline (-21 per cent) due to the high base of Q1FY24 with a one-time launch of Olaparib (ovarian cancer drug).

Motilal Oswal said that Ebitda for the quarter was likely to grow by 15 per cent or so, led by higher share of niche launches in the US generics segment. PAT is expected to grow at 21 per cent year-on-year (Y-o-Y).

In the largecap space, Motilal analysts expected Torrent Pharma and Sun Pharma to deliver sales growth of 12.5 per cent and 12.4 per cent, respectively, backed by new launches, increased focus on over-the-counter business, and improving medical representative productivity.

“We estimate Eris to deliver 50 per cent Y-o-Y growth in domestic formulation sales, largely due to the integration of acquired brands,” the brokerage said.  

For Mankind Pharma, partial recovery in the OTC segment would drive 12 per cent domestic sales growth. “We expect overall domestic sales for relevant companies in our coverage to grow 11.5 per cent Y-o-Y in Q1FY25,” Kotak Institutional Equities said. It added that active pharmaceutical ingredients (API) volumes were expected to be subdued on a quarter-on-quarter basis for most companies – around 2 per cent sequential sales decline in APIs. The contract development and manufacturing segment is expected to post ‘robust’ Y-o-Y growth in Q1FY25, led by contributions from new projects.

As for US generics, base effects would moderate the growth trend in Q1FY25. Analysts expect reducing of pricing pressure and increased traction in limited competition products such as generic Revlimid, generic Spiriva, and generic Vascepa to strengthen the Y-o-Y growth.

“Sun Pharma’s US sales could grow 10 per cent Y-o-Y, led by its specialty portfolio. US sales of Torrent Pharma, Glenmark may decline 7.6 per cent and 7.1 per cent Y-o-Y due to the lack of new approvals and launches and regulatory issues at their facilities (Glenmark). During the quarter, 15 facilities were inspected by the USFDA for our coverage companies. There were 68 approvals during Q1FY25 for firms under our coverage vs. the two-year average of 53 approvals,” said analysts at Motilal Oswal.

BNP Paribas noted that the average revenue per occupied bed growth momentum continues for hospitals with Apollo Hospitals and Fortis to post 6 per cent ARPOB growth.

Occupancy levels are likely to remain flat at 62 per cent for Apollo, and 100 basis points improvement Y-o-Y for Fortis to 65 per cent. “We project Apollo Hospital's offline pharmacy business to report 10 per cent Y-o-Y revenue growth in Q1FY25, and the online pharmacy distribution and 24x7 arm to remain flat Q-o-Q. We expect Apollo Hospitals to report a  Q-o-Q flat Ebitda margin of 13.1 per cent,” BNP Paribas noted.

For diagnostics like Dr Lal Pathlabs and Metropolis Healthcare, analysts estimate double-digit revenue growth led by high single-digit patient volume growth and improved realisation. “On aggregate, we expect Ebitda margin to decline marginally Y-o-Y, led by Dr Lal Pathlabs,” BNP Paribas noted, adding that, they expect Fortis diagnostic arm, Agilus, to report Y-o-Y flat revenue due to weak brand recognition amongst patients and doctors after its rebranding to Agilus from SRL. Ebitda margin may slip below 20 per cent for Agilus due to increased marketing spend.

Motilal Oswal estimated a 13 per cent revenue growth for hospitals under its coverage in Q1.