COVID-19 to impact Q1FY21 performance
We expect pharma and healthcare companies under our coverage to report moderate performance for the quarter ended Jun'20 amid COVID-19. We expect impact of lockdown to be visible in revenue of acute portfolio and injectable products. US revenues would witness flattish to marginal decline sequentially due to decline in volumes of injectables and specialty portfolio. We estimate India business to be flattish to marginal decline as seen in secondary sales data. We forecast the EBITDA margin of covered companies at ~18% (-240bps YoY) due to lower revenue growth. Hospitals and Diagnostic would report significantly weak performance due to major drop in occupancy levels and pathology test volumes. Overall, we expect our coverage universe to report 1.9% YoY revenue growth but a YoY decline of 10.1% at EBITDA level.
* India secondary sales: The Indian pharma market witnessed a decline of 5.9% in value terms for Jun’20 (source: AWACS). Volumes declined 11.8%, while prices grew .5% and new introductions contributed 1.4%. We expect primary sales YoY growth for under coverage companies to be flattish to marginal decline depending upon spill over of sales from Q4FY20 in few companies like Cipla, Alkem, etc.
* US generics: US sales are likely to drop 4% QoQ in Q1FY21. Alkem and Glenmark would have largely flattish sales. We expect Alembic and Cipla to report QoQ growth aided by supplies of products in shortage. However, Sun Pharma, Dr Reddy’s and Lupin would show QoQ decline in US sales due to injectables, specialty products and high QoQ base.
* Companies to watch: We expect relatively better results from: 1) Aurobindo with new product approvals and stable pricing; 2) Cadila & Alembic on back of supplies of products in shortage in US market; and 3) Alkem Labs on spill over of sales from Q4FY20 and cost control measures.
* Factors to watch: Key factors to focus on during management commentary: i) Growth outlook in India for the industry and respective companies, ii) update on restart of USFDA inspections, iii) price scenario in base US business on increased competition, and iv) growth in emerging markets with demand outlook
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