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Our Pharma coverage for 1Q24e, in line with their past few quarterly trends, is expected to report a healthy Revenue/EBITDA (ex-BIOS) growth of 14%/24%YoY and EBITDA margin of ~24%. US sales, aided by new launches (primarily gRevlimid), drug shortages and stable pricing, along with healthy India performance will continue to drive growth and profitability. NTCPH, DRRD, SUNP and ZYDUSLIF are likely to increase/ sustain their gRevlimid contribution QoQ, largely driving sales over a low base. DRRD will consolidate Mayne Pharma (Key asset: gNuvaring) further aiding topline growth. India business will continue its uptrend with early double digit growth (1Q IQVIA IPM growth trending at c. 9%) driven by chronic therapies and price hikes. Gross margins to benefit from lower raw material inflation and mix which, along with better pricing, supports EBITDAM improvement. We expect diagnostic companies to compound earnings hereon. Among hospitals, Medanta to sustain its strong operating performance led by Lucknow and Patna ramp-up meanwhile Aster is expected to report weak 1Q due to GCC seasonality. We await key updates on GCC restructuring. Our top picks are SUNP, DRRD, BIOS, IPCA in Pharma and DLPL and Medanta in Healthcare

* Healthy domestic growth: Our coverage companies are aggressively expanding their domestic footprint either organically (SUNP, IPCA, LPC) or inorganically (TRP, DRRD, NTCPH). TRP’s Curatio acquisition wef Oct’22 will reflect in incremental domestic growth. DRRD’s in-licensing deals and innovation will be a key focus area for future growth. Cipla’s healthy domestic sales will improve margins sequentially. Natco’s Agro-chem business will ramp up this quarter due to kharif season (INR 600-800mn). Domestic market is expected to sustain early double digit growth in FY24 and the NLEM price increase should be reflective beyond 1Q24.

* Revlimid contribution to remain elevated: DRRD, NTCPH, SUNP and ZYDUSLIF are likely to improve/sustain their gRevlimid contribution. The innovator guidance indicated higher share for generics players. DRRD acquired Mayne Pharma (key assets: gNuvaring and gCardizem) which will be consolidated wef Apr’23. Cipla has seen sequential decline in Albuterol sales, steady rise in Lanreotide and Luprolide. LPC has further ramped up gSuprep, launched Darunavir and is likely to realise USD 25mn licensing income which will sustain EBITDA margins. ALPM had impairment charges pertaining to facilities and Aleor in FY23; base business to remain steady. BIOS has ramped up Fulphila and Ogivri volumes meaningfully. Semglee has been gaining higher ms and volumes whilst Syngene will benefit from Zoetis sales. ZYDUSLIF’s Trokendi XR contribution along with gRevlimid contribution will sustain US base and preserve margins at higher levels. NTCPH will realise gRevlimid profit share thereby reporting strong performance. SUNP’s US sales will benefit from specialty uptick (Ilumya and Winlevi), gRevlimid contribution thereby offsetting Halol IA impact. As pace of approvals (and inspections) accelerate, we believe US outlook will improve.

* No fireworks in 1Q: Diagnostic companies to grow their non-Covid revenue in mid-teens. DLPL is expected to improve earnings hereon. METROHL’s NACO expiry will create a void in growth while centre expansion may dent margins. Vijaya’s Punjagutta, Tirupati and Rajahmundry ramp-up can drive incremental growth. We expect Krsnaa’s operationalized centres (RHP centres) and new pathology collection centres to drive ~20% topline growth and ~25% EBITDAM. Notably, it won the Rajasthan tender (worth INR 4.5bn) which can add INR 1.5bn revenue p.a. In Hospitals, we expect Aster DM to report weak earnings due to GCC seasonality and new hospital losses. We await key updates on GCC restructuring. Medanta is likely to sustain its strong operating performance particularly in Lucknow and Patna

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