Healthcare Q3 Results Preview - Pharma To See Strong Ebitda Growth Aided By U.S. Markets: Prabhudas Lilladher

Prabhudas Lilladher Report

We expect pharmaceuticals companies under our coverage to report another strong quarter with Ebitda growth of 19% YoY (flat QoQ) mainly aided by -

1. new launches (gRevlimid, gSpiriva, etc) in U.S. market,

2. steady domestic business and

3. higher margins.

We expect the quarter to continue seeing easing of cost pressures which will thereby aid margins YoY. The companies have witnessed slow pick up in flu season which will be offset by steady base business and new launches.

On domestic formulation business; volumes offtake in acute and trade generic segments are likely to recover while benefit of price hike in National List of Essential Medicines portfolio and steady growth in chronic portfolio will be seen in few domestic focused companies.

Our top picks remain Sun Pharmaceuticals Industries Ltd., JB Chemicals and Pharmaceuticals Ltd., Eris Lifesciences Ltd. and Torrent Pharmaceuticals Ltd.

Hospitals:

Steady growth despite weak season despite Q3 being seasonally weak quarter, we forecast hospital companies to deliver healthy YoY growth in Q3 FY24 aided by higher average revenue per occupied bed and steady occupancy.

However, on sequential basis we anticipate 100-400 basis points decline in occupancy impacted by festive season. Further state elections in Telangana and cyclone impact in Chennai have also impacted occupancy for Andhra Pradesh, Telangana and Chennai based units. This will impact growth for Apollo Hospitals Enterprises Ltd. and Krishna Institute of Medical Sciences Ltd. hospital business given their presence.

We forsee ARPOB to continue to remain higher on YoY basis. Overall, we expect +16% YoY growth (down 5% QoQ) in post Indian Accounting Standard Ebitda (excluding of Rs 1.67 billion loss in Apollo 24*7, Ebitda growth expected at +12.3% YoY) in Q3 for our coverage universe.

We remain structurally positive in the hospitals space and expect momentum to continue with-

1. improvement in occupancy,

2. better case- payor mix and

3. new capacity additions.

Our top picks in the sector are Max Healthcare Institute Ltd., Jupiter Lifeline Hospitals Ltd. and Fortis Healthcare Ltd.

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