| Summary of Contents
| SHAREKHAN SPECIAL Q4FY2012 Pharma earnings preview Key points -
Revenue to grow 24% YoY on strong domestic sales: We expect the Sharekhan pharma universe to report a 24% year on year (YoY) growth in revenue in Q4FY2012 on an aggregate basis, mainly led by Sun Pharmaceutical Industries (Sun Pharma; estimated revene to be up 55% YoY on strong performance of Taro), Glenmark Pharmaceuticals (Glenmark Pharma; estimated revene to be up 25% YoY on key launches in the US and Latin America and strong domestic sales), Torrent Pharmaceuticals (Torrent Pharma; estimated revene to be up 24% YoY on a low base) and Ipca Laboratories (estimated revene to be up 23% YoY on strong growth in institutional business). The sales in India of our pharma universe are likely to post a 24.5% YoY rise during the quarter, which is better than four sequential previous quarters. India sales would be mainly driven by Lupin (estimated to be up 33% YoY), Sun Pharma (estimated to be up 27% YoY) and Glenmark Pharma (estimated to be up 24.5% YoY).
On a quarter-on-quarter (Q-o-Q) basis we expect a marginal rise of 1.3% in the revenue for the universe as most of the acquisition led revenue is included in Q3FY2012. -
Operating margin to improve by 394bps YoY; thanks to low base effect: The operating profit margin (OPM) is expected to improve to 26% in Q4FY2012 from 22% in Q4FY2011 for our universe. The margin would be mainly driven by a higher off- take from new facilities, higher inventory valuation and a favourable change in the product mix. The biggest gainer on the margin front would be Torrent Pharma (estimated margin to be up 1,195bps YoY) and Glenmark Pharma (estimated margin to be up 980bps YoY) on a lower base of Q4FY2011 due to one-off kind of expenses hitting operating margins. Other players like Opto Circuits (estimated margin to be up 512bps), Ipca Laboratories (estimated margin to be up 411bps YoY) and Lupin (estimated margin to be up 386bps YoY) would report better margins due to operationalisation of new facilities which would contribute to revenues and better product mix.
However, we expect a decline in margin for Divi's Laboratories (Divi's Lab; -322bps; due to higher operating costs at the new special economic zone [SEZ] facility). On a Q-o-Q basis, the operating margin of the universe is likely to shrink by 248bps YoY, mainly due to unavailability of exclusivity revenues in case of Sun Pharma. -
Adjusted PAT to jump by 24% YoY; forex loss may spoil the show: We expect the adjusted net profit (without considering foreign exchange [forex] losses and extraordinary items) to grow by 24% YoY for our universe, mainly led by Torrent Pharma (expected to be up 181% YoY on a low base), Sun Pharma (expected to be up 44% YoY) followed by Glenmark Pharma (expected to be up 20% YoY) and Lupin (expected to be up 19.6% YoY). On a Q-o-Q basis, the universe would show a decline of 2% in the adjusted net profit (ignoring marked to market [MTM] forex losses), mainly led by Glenmark Pharma which would record a 30% decline in its net profit, mainly due to lower licensing income.
However, MTM forex losses would materially impact the bottom line of key players like Glenmark Pharma (expect Rs100 crore of forex loss), Ipca Laboratories (expect Rs36 crore of forex loss) and Lupin (expect Rs30 crore of forex loss). -
Top Picks: We prefer Sun Pharma, Divi's Lab and Ipca Laboratories | | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article. | |
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