By Anshia Dutta
According to an Edelweiss Securities report, the Indian pharmaceutical industry’s December quarter revenue is expected to remain flat and the profits are likely to plummet on account of weak US businesses and an appreciation of the Indian rupee.
The Edelweiss report
According to the Edelweiss Securities Report, the sector’s earnings are likely to remain stagnant despite the October-December quarter being “action-packed”. The report said, “The pharma sector’s Q3FY18 (October-December quarter) revenue is estimated to remain flat year-on-year, while EBITDA (earnings before interest, tax, depreciation, and amortization) and PAT (profit after tax) are likely to decline 15% and 19%, respectively.”
The reasons for the same have been attributed to a decline in the US businesses and the appreciation of the Indian rupee against the US dollar or the Brazilian real, the Japanese yen and the South African Rand. Stating the same, the report said, “The US revenue is expected to decline 11% year-on-year for the sector in constant currency (CC), as faster approvals, heightened competition, and sustained pricing pressure to dent growth.” Like a light at the end of a tunnel, the report also mentioned that the domestic sales of the industry are forecast to grow 12% year-on-year, on a low base, since the US Food and Drug Administration (USFDA) had granted the highest-ever approvals in the October-December quarter with 246 nods. However, faster approvals might lead to heightened competition and pricing pressure, which, in turn, could suppress the sector’s earnings.
Growth prospects in the next fiscal year
Since the pharmaceutical sector is still struggling with the structural changes taking place in the economy—further customer consolidation and rising competition in the US—it is expected that the industry is going to witness a tough and challenging year. 2017-18 is possibly going to turn out to be a disappointing year for the industry, as the rupee will continue to appreciate on account of domestic challenges and the US economy. As mentioned in the report, “Consensus downgrades continued, albeit tempered compared to previous quarters, with 2%/3% cut in FY18/19E earnings during October-December.”
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