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Strong domestic growth to drive Q1...

Lower base and a revival in domestic formulations is likely to drive overall sales. On the other hand, despite a favourable base in some select stocks, US formulations growth is expected to remain subdued amid lack of meaningful launches, price erosion and currency headwinds. The I-direct healthcare universe (12 coverage companies) is expected to post decent YoY growth of 11.4% to ~| 44497 crore led by strong growth in domestic formulations being partly offset by slow growth in the US. Domestic growth is expected to be led by lower base, recovery in acute segment growth and Covid-related product sales.

The US (select pack) portfolio is expected to grow mere 2.8% YoY to | 12127 crore. Favourable base effect (Lupin, Sun Pharma) is being largely offset by 1) lack of meaningful launches, 2) price erosion (Alembic – Sartans, Cadila – Mesalamine) and 3) rupee appreciation vs. US$ by 2.8% YoY. Domestic formulations (select pack) are expected to grow ~22% to | 10137 crore due to base effect, normalisation of acute growth and Covid-related product sales. Europe is expected to grow 16.5% YoY driven by lower base and currency tailwinds (6.4% YoY). Amid higher base, the API segment is also expected to decline ~10% YoY.

On the hospitals front, the second wave is likely to change the product mix more towards Covid occupancies, which is likely to impact realisations. On the companies front, three out of 12 companies are likely to report 15%+ YoY growth. Key monitorables are: Lupin, likely to register above 21% growth amid one-off US$50 million licensing income and strong domestic growth. Amid lower base, Sun Pharma and Apollo Hospitals are likely to register 19.5% and 27.7% YoY growth, respectively.

EBITDA to improve ~10% YoY; margins to remain at ~23%

EBITDA of the I-direct healthcare universe is expected to grow 10.1% YoY to | 10326 crore. EBITDA margins are likely to decline marginally by 26.7 bps YoY to 23.2%, with increase in marketing & travel cost likely to be offset by a better product mix.

Adjusted PAT to grow ~19% YoY

Adjusted PAT is expected to grow 18.6% YoY to | 6120 crore. Delta vis-à-vis EBITDA is likely due to a decline in interest cost, tax rate and higher other income.

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