Indian Pharma Industry: 4QFY17E Results Preview

4QFY17E is likely to be a soft quarter for the Indian pharma sector. Overall, we expect 6.7 per cent top line growth for our coverage universe. EBITDA for most companies is expected to remain flat on a high base of 4QFY16, which includes sales from bigger products like gAbilify, gGleevec and gGlumetza.














Source:Company, HDFC sec Inst Research

However, we believe that operating performance is likely to have bottomed out, and companies like LPC and CDH are now receiving a higher number of product approvals post US FDA clearances for key plants.

Within our coverage universe, LPC, GNP and CIPLA are likely to report good numbers in 4QFY17E. We expect LPC's top line to grow at 12 per cent YoY. Effects of increased generic competition in gGlumetza will not be visible during this quarter. Profits are likely to be flat on higher R&D spend . The launch of gZetia in Dec-16 is likely to drive both top line and bottom line for GNP (12.6 per cent top line and 72 per cent PAT growth). CIPLA to report better operating performance on a favorable base.

SUNP will report flat top line growth on a high base of 4QFY16 which included gGleevec sales. Margins are likely to improve sequentially, with the absence of one-off costs in this quarter. ARBP will also report modest growth of 6 per cent on top line and 7 per cent growth in EBITDA in 4QFY17E, despite a number of launches in 3Q and 4Q.

This is a seasonally weak quarter for ALKEM and it is likely to report mid teen growth on top line and deliver a weaker EBITDA margin at 15-16 per cent due to adverse product mix.

DRRD's revenues will continue to decline in 4QFY17E on account of the erosion in its US base business. Impact of DIVI's import alert will not be entirely visible in its 4Q numbers. Remediation activities could result in a lower EBITDA margin.

TOP PICKS: LPC, TRP, GRAN

Rating changes: Downgraded to Neutral: CDH; Upgraded To
Buy:gnp And Alpm.