"Reported growth was lower in some companies due to the high base of sales for Covid-related drugs. US business performance remained volatile, as few companies posted higher-than-expected sales driven by the launch of generic Revlimid, with a sequential (QoQ) revenue rise for Sun Pharma, Dr Reddy's, Cipla and Zydus Life. Price erosion remained in high single digit," the note on pharma Q2 earnings review stated.
The EBITDA margin improved from the previous quarter for most companies given cost normalisation, strong India revenue growth and some large product opportunities in the US.
“Following the results, at an aggregate level we pare pharma companies’ FY23/FY24/FY25 EBITDA margin estimates by 20bp/10bp/20bp and EPS expectations by 1.5%/0.7%/0.1%. For diagnostics companies, at an aggregate level we cut FY23/FY24 EPS estimates by 4.8%/2.7%," it added while retaining Sun Pharma, Fortis Healthcare and Metropolis as its top stock picks.
The brokerage house has ‘Buy’ ratings on Indian pharma stocks Metropolis Healthcare with a target price of ₹2,052 per share, Dr Lal Pathlabs (TP: ₹2,952), Aurobindo Pharma (TP: ₹564), Fortis Healthcare (TP: ₹342), Divi’s Laboratories (TP: ₹3,874).
The brokerage also has Buy tags on Sun Pharmaceutical Industries (TP: ₹1,164), Apollo Hospitals (TP: ₹4,880), Dr Reddy's Laboratories (TP: ₹4,905) and Torrent Pharmaceuticals (TP: ₹1,770).
Meanwhile, it has ‘Hold’ stances on Zydus Lifesciences with a target price of ₹418 and Cipla (TP: ₹1,038). BNP has suggested ‘Reduce’ stance on Lupin with a target price of ₹615.
The key potential catalysts for the Indian pharma sector, as per BNP Paribas, are steady double-digit revenue growth momentum in domestic pharma and healthcare businesses; resolution of US FDA issues at impacted plants; and growth acceleration from increasing healthcare awareness and higher demand for quality healthcare.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
