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In 3QFY24, we expect double-digit domestic growth from IPCA, TRP, CIPLA and SUNP. We expect gRevlimid contribution of USD 95mn/ USD 54mn/ USD 20mn for DRRD, Cipla and SUNP, respectively. SUNP (specialty growth, gRevlimid, Mohali supply resumption) and LPC (gSpiriva, gPrezista) can potentially deliver positive earnings surprise. We expect sequential improvement in BIOS’ revenue driven by ramp-up in existing biosimilars, higher generics revenue and research contribution. Due to Unichem acquisition, IPCA’s performance is not comparable. Krsnaa and Vijaya’s topline growth should outperform larger diagnostic peers. METROHL’s growth was slightly impacted by Tamil Nadu floods. We expect Medanta to sustain its strong operating performance with stable margins QoQ due to better case mix. We prefer SUNP as our top pick in Pharma, and Metropolis, Medanta and Jupiter in healthcare.

* Decent domestic growth: IPM growth (as per IQVIA) is trending at ~8% benefitting partly from deferred infection season in Oct’23. However, acute segment growth remains weak at ~8% vs. ~10% chronic. We expect moderate growth for our coverage companies in 3Q. IPCA is on track to achieve 12-14% FY24 domestic sales guidance (3Qe: 14%). SUNP’s 3Q IQVIA growth is trending at ~9% (higher than IPM) given the lower antidiabetic drag and Istamet base reset, and TRP is also expected to report early double-digit growth with Curatio now in the base. Field force expansion, chronic segment growth and price hikes are key growth drivers. Overall, we believe domestic business is expected to sustain early double-digit growth in FY24.

* US momentum to sustain: DRRD, Cipla and SUNP will be key gRevlimid beneficiaries this time around with contribution of USD 95mn/ USD 54mn/ USD 20mn respectively. Mayne portfolio ramp-up should support incremental growth in base business (at USD 279mn). gTamiflu tailwinds should aid NTCPH, ZYDUSLIF and LPC albeit it has been weaker this time. We build in ~USD 270mn specialty revenue and sequential improvement in US generic revenue (with Mohali supply resumption). SUNP and LPC can potentially deliver positive earnings surprises. LPC’s management alluded to lower gSpiriva sales in 3Q due to channel fill-up in 2Q and margin delivery beyond 18% seems difficult this quarter. Cipla’s gRevlimid and Lanreotide should sustain current US momentum; site compliance and timeline of new launches remain key monitorables/ risks. We believe BIOS’ revenue will pick up QoQ driven by uptick in existing biosimilars and better generics performance but flattish research contribution. While ALPM’s US sales may improve marginally, we expect stable EBITDAM. TRP’s US business is expected to remain subdued on account of portfolio optimisation initiatives, which may reduce margin drag. IPCA’s US business is at an inflection point and given that it is the first full quarter of Unichem, margin may remain subdued (JMFe: 16% vs. ~19% in 1Q).

* A seasonally weak quarter: We expect ~12% YoY revenue growth for DLPL with an EBITDAM of ~26%. The 12% growth assumption is based on 8% volume growth and 4% realisation growth. METROHL’s NACO expiry has created a void in earnings and centre expansion has dented margins. Hitech’s operations were impacted by recent floods in Tamil Nadu (overall impact not material). METROHL reported core revenue growth of 12%YoY. Vijaya’s growth will further accelerate with PH Diagnostics’ acquisition while new hubs (Punjagutta, Tirupati and Rajahmundry) continue to ramp up. This, in our view, should drive ~16%YoY revenue growth and ~39% EBITDAM. Krsnaa’s strong revenue momentum should sustain in 3Q, in our view. New centre costs particularly from Assam will keep EBITDAM in check (21-22%). We await clarity on the Rajasthan agreement, which will accelerate growth momentum over the next few quarters. Among Hospitals, we expect Medanta to report 18.5%/27.5% Revenue/EBITDA growth driven by ramp-up of Lucknow / Patna and price hikes. Aster’s sequential improvement will be driven by GCC seasonality. JLHL is expected to have flattish sequential topline growth with ~23% margins, in our view. We await commentary on new hospital sites.

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