Market participants were also positively surprised by the growth and inflation outlook for 2021-22 given by RBI. Maintaining its earlier GDP growth forecast of 9.5%, it lowered its inflation forecast to 5.3% from 5.7%. This indicates that inflationary pressures are easing and the RBI may now maintain status quo on policy rates during 2021-22.
Though the Sensex once again managed to close the level of 60,000, it could not reach its previous high of 60,412 achieved on 27th September. We told you last week that nifty It is trading between 17,400 and 18,070 and the same band was not broken last week as well. So, how is the market expected to perform in the coming weeks? Sachchidanand Uttekar, deputy VP, Trade Bulls Securities, says, “Weekly gains from 17,400 to 17,630 are good signs and they indicate that Nifty may go up to 18,300-400 in the coming weeks.”
(Narendra Nathan / ET Office)
Sector Update: Pharma
slow phase looms as covid subsides
Earnings will remain flat after healthy growth: From the highest earnings growth of 48% in October-December 2020-21, the year-on-year earnings growth on an overall basis for the companies under our coverage has been on a downtrend. We expect earnings to be flat YoY on an aggregate basis in July-September 2021-22. Increasing competitive pressure on the US base business – coupled with lower pace of launches and less COVID-related off-take – is expected to drag down the sector’s overall performance for the quarter. Supply chain disruptions are taking a toll on the company’s margins due to rising raw material costs and limited scope to deliver it to the customers.
Improved doctor-patient engagement in Domestic Formulation (DF) and revival of non-Covid drugs is expected to offset the drag to some extent. Overall, we expect sales to grow 3% annually to Rs 541 billion; EBITDA is expected to decline by 2.8%, while PAT will be flat.
Slow growth expected: We expect the growth trajectory in the DF segment to normalize to 12% y-oy at the aggregate level for companies under our coverage in July-September 2021-22. In terms of therapy, the Anti-Infective, Gastrointestinal, Respiratory and Pain segments are witnessing strong growth due to better patient-doctor interactions and favorable seasonal changes, as well as partly due to the low base of last year. Company-wise, we expect Dr Reddy’s to see 20% year-on-year growth in July-September 2021-22, led by ramp-up in products acquired from Wockhardt as well as Ovid product sales (during the base absent). We expect IPCA Labs, Ajanta Pharma, Sun Pharma, and Alkem Labs to grow 18%, 16%, 15%, 14% year-on-year respectively, with a) continued improvement in pain/analgesics (IPCA), b) all Strong development in therapies, particularly in ophthalmology, on a reduced basis (AJP), c) incremental benefit from MR expansion (SUNP) along with improvements in chronic therapy, and d) improved performance in acute therapy (ALKEM).
US sales will remain under pressure: Sales are expected to decline 2.5% to $1.8 billion in July-September 2021-22, with pricing pressure continuing across the base portfolio in the US. Total approvals for our coverage companies decreased to 33 in July-September 2021-22 – this reduced the companies’ abilities to offset higher price erosion with new launches. A delay in the USFDA’s oversight could cause TRP US sales to decline 9% year-over-year. Sun Pharma’s specialty portfolio is expected to grow at 15% year-on-year, driven by better performance.
We expect Gland Pharma to outperform the rest of our coverage companies, given a) continued ramp-up in ROW sales, b) normalization in US sales and c) some sales of COVID products. Accordingly, we expect 34% earnings growth for Gland Pharma. Continued traction in CRAMS, ramp-up in production of the COVID drug molnupiravir, and increased capacity utilization will drive strong earnings growth for Divi’s.
(Motilal Oswal)