Pharma sector likely to report good growth for Q4 of last fiscal

According to a report in Centrum Broking, the domestic pharma market will gain from price increase, volume growth and new product introduction

The pharma sector is expected to report good growth for the fourth quarter of 2015-16 despite regulatory concerns raised by US FDA and the recent ban on 344 fixed dose combinations imposed by the government, as per a report.

“We expect the pharma sector to report good growth for Q4FY16 despite regulatory issues from US FDA and the recent ban on 344 FDC. The price increase, volume growth and new product introduction are likely to drive the domestic pharma market,” Centrum Broking said in its recent report here.

“For Q4FY16, we expect our pharma universe to report 14 per cent year-on-year growth in revenues, 52 per cent in EBIDTA and 31 per cent in net profit. We expect 570 bps year-on-year improvement in margin to 23.2 per cent from 17.5 per cent mainly due to the reduction in material cost. We expect EBIDTA margin to improve by 570 bps year-on-year to 23.2 per cent from 17.5 per cent due to price revision, volume growth and softening of raw material prices and pharma companies to benefit from the reduction in material cost, led by decline in prices of crude-based chemicals and solvents,” it said.

Moreover, the companies are likely to benefit from the reduction in transportation cost due to lower fuel prices, it added.

According to the report, the sector is passing through uncertainty on the regulatory front, price decline in NLEM products and ban on 344 FDC drugs.

However, over 60 companies have moved the Delhi High Court and got a stay against the ban.

As per the report, it expects pharma MNCs in the country to perform well in future due to reduction in material cost, line extension of existing brands and their debt-free status.

However, the report pointed out that the slowdown in the domestic market and regulatory risks for manufacturing facilities are key issues for the industry.