With the fiscal fourth quarter earnings season now in full swing and a number of major companies across segments already having released their Q4 numbers, the coming week will see the pharma and healthcare sector announcing their quarter figures. According to InCred Equities, during the quarter in review, the domestic market clocked a 7- 7.5 per cent growth led by chronic therapies (high-single digit growth) which was partly offset by a lower contribution from the acute therapy portfolio (mid-single digit).
The quarter ended March 2025 is expected to witness early-teen India business growth for most of InCred Equities’ coverage companies. While Sun Pharmaceutical and Ipca Laboratories are expected to post India revenue growth at the higher end of the band, others like Cipla, Lupin and Torrent Pharmaceuticals are likely to report India business growth in early teens. Alkem Laboratories and Zydus Lifesciences are likely to report high mid-single digit growth.
When it comes to US business, InCred Equities projected a low-to-high single digit sequential growth. “We expect companies under our coverage to post a 2-12 per cent sequential growth in the US business (due to higher gRevlimid sales for most companies), with a few exceptions such as Lupin (-5 per cent – no exposure to gRevlimid) and Zydus Lifesciences (+28 per cent – higher exposure to gRevlimid).”
How will pharma sector perform?
InCred Equities projected 12 per cent YoY topline growth for pharma coverage companies with a 170bp YoY improvement in margin. In terms of revenue, Axis Securities anticipated a 10.9 per cent YoY and 0.8 per cent QoQ growth along with EBITDA growth of 15.3 per cent YoY and a decline of 1.7 per cent QoQ. Moreover, adjusted PAT is expected to grow by 8.7 per cent YoY and decrease by 7.9 per cent sequentially. “Domestic formulations and niche launches in the US market will likely drive this growth. Within the US generics, growth is particularly driven by products such as gRevlimid, gMirabegron, gSpiriva, gAlbuterol, gPrezista, gLenalidomide, gProlensa, gChantix, and various biosimilars.” The US market will post low single-digit growth, led by volume growth in existing products and the launch of new products such as gMirabegron, in the last quarter, despite elevated pricing erosion.
Meanwhile, Axis Securities maintained, the Indian business is expected to experience muted growth on a sequential basis, driven by sluggish growth in chronic therapies and a recovery in acute therapies. Additionally, the brokerage firm anticipated a 90 bps improvement in margins on a YoY basis for most companies in its coverage. “The primary reasons for this margin improvement are (i) New launches during the year’s formulations business, (ii) Stable freight costs and decline in API prices, and (iii) Lower input costs and a better product mix towards niche launches,” it added.
Expectations from healthcare sector
Axis Securities anticipated the healthcare sector to register revenue growth of 20.7 per cent YoY while it is expected to decline by 2.8 per cent sequentially. This, it added, would be largely driven by an expected improvement in occupancies of up to 100 bps and ARPOB growth of 7-8 per cent. “Our analysis indicates that Fortis and Max could achieve growth of 13.7 per cent and 27 per cent YoY, respectively, due to the installation of additional beds and the addition of new hospitals to their portfolios. However, Medanta may not lag behind its peers, although its Lucknow hospital has begun to show signs of a gradual recovery. Despite a soft quarter in healthcare, HCG could report healthy topline growth driven by contributions from the Vizag hospital,” the brokerage firm maintained.
Axis Securities projected an adjusted EBITDA growth of 22 per cent YoY and 6 per cent QoQ for its hospital coverage while maintaining that these companies may surpass industry growth, driven by a superior product portfolio and a strong product pipeline.
An update on CDMO companies
For CDMO companies, InCred Equities expect double-digit YoY growth (Divi’s Laboratories – 11 per cent and Laurus Labs – 14 per cent) except for Gland Pharma (-6 per cent YoY). “We expect 100bp+/800bp+ YoY margin growth for Divi’s Laboratories and Laurus Labs on low base,” it said.
How will diagnostics business fare in Q4?
After a seasonally lean Q3FY25, InCred Equities said that the diagnostic companies are expected to register sequential (1-8 per cent) and YoY (4-16 per cent) growth in Q4FY25F led by volume growth (8-12 per cent). “Our coverage companies are likely to witness an EPS growth of 6-30 per cent,” it said.
Expectations across companies
Here is an analysis on how companies across different business verticals in the health and pharma sector are expected to perform during the quarter in review:
Ajanta Pharma
According to InCred Equities, Ajanta Pharma’s Asia and Africa branded business is expected to grow in mid-teens, in line with its guidance, while India should see a 10 per cent YoY growth. US business is estimated to grow by 7 per cent QoQ.
Alkem Laboratories
The company’s India business growth is projected at 6.2 per cent YoY while RoW market growth is likely to be decent at 9 per cent YoY. The US business will see an improvement of 5 per cent QoQ. Margin, meanwhile, is likely to decline sequentially by 600bp due to high R&D costs and a rise in other expenses.
Aurobindo Pharma
US business is expected to grow 3 per cent QoQ to $450 million, while for the EU business, the brokerage firm factored in sequentially flat revenue. For the API business, around 10 per cent YoY growth and 5 per cent growth for the RoW market is expected. Margin is estimated to improve by 150bp QoQ partially due to gross margin improvement of 60bp QoQ (led by higher US sales).
Cipla
Cipla’s US business is expected to improve due to better Lanreotide sales (has given guidance that normalcy will resume from Mar 2025F) and gRevlimid contribution. India sales should grow at a healthy 13 per cent YoY, while EU and RoW markets will grow by 9 per cent YoY. Overall, revenue is estimated to grow by 9.4 per cent YoY, and margin to improve by 130bp YoY due to healthy US sales.
Divi’s Laboratories
An overall growth of 11 per cent is expected, led by custom synthesis business (17 per cent YoY growth). “Favourable INR-US dollar movement should help with further marginal benefits. A 100bp sequential margin improvement is likely QoQ due to higher contribution from the custom synthesis business,” it said.
Gland Pharma
InCred Equities said that Cenexi’s run rate is expected to improve from EUR41 million to EUR42 million while Cenexi’s margin to improve by 280bp QoQ. Ex-Cenexi, revenue growth is estimated at 5.5 per cent QoQ and margin to decline by 500bp due to lower milestone income.
Ipca Laboratories
A revenue growth of 10 per cent is expected and consolidated margin is projected to grow by 20.4 per cent. India business is likely to grow by approximately 14 per cent YoY on a relatively low base. Unichem subsidiary should grow by around 22 per cent YoY while ex-Unichem, business should grow by 7 per cent YoY.
Lupin
InCred Equities expect a growth of 13 per cent YoY in India business whereas the US business revenue is likely to be $232 million (-1 per cent QoQ) led by Mirabegron, 180-day marketing exclusivity in gPred-forte and the launch of Rivaroxaban tablets. Emerging and RoW markets are expected to grow 11 per cent each. “The gross margin should improve by 30bp QoQ whereas the EBITDA margin is expected to decline sequentially by 240bp due to the rise in R&D expenses and higher other expenses,” it said.
Torrent Pharmaceuticals
The company’s Germany business is expected to post a healthy momentum with around 10 per cent YoY growth, Brazil business is likely to be impacted by currency problems while the US business should improve with around 12 per cent sequential growth. The India business is expected to clock around 12 per cent YoY growth.
Metropolis Healthcare
Due to weak acute testing volume in Q4FY25, test volume growth is expected at 7.5 per cent and realization growth of 3.6 per cent. “We expect an overall revenue growth of 4 per cent YoY, gross margin of 79.5 per cent due to input cost pressure and overall margin of 23.8 per cent (down 30bp YoY) due to acquisition costs,” it said.