Pharma, Healthcare Q2 Results Preview - Steady; Revlimid To Normalise: HDFC Securities

HDFC Securities Institutional Equities

The India Pharma and Healthcare sector is expected to maintain its growth momentum in Q2 FY25E. We project sales/Ebitda growth of 11%/15% YoY for our coverage universe. Our assumptions are:

1. Pharma coverage is expected to see 11% YoY sales growth, driven by a 12% YoY increase in the India business, offset by a ~5% QoQ decline in the U.S. Moderate price erosion and steady traction in key products (gSpiriva, gMyrbetriq) and the specialty scale-up will partly balance the QoQ decline in gRevlimid sales.

2. Ebitda margins for the pharma segment are expected to expand by 88 bps YoY, driven by growth in key markets (India and U.S.) and lower input costs (expanding gross margin by ~201 bps YoY). This will be partly offset by higher costs, including an expected increase in R&D spending and rise in freight costs (+219% YoY and +38% QoQ).

3. The hospital business is projected to grow 17% YoY, supported by steady occupancy, growth in Average revenue per occupied bed, and M&As (Max Healthcare). Ebitda margin expansion is expected for Apollo Hospital due to reduced spending on Apollo 24/7, while Max Healthcare may see a margin decline due to integration costs.

4. The diagnostics segment is anticipated to deliver 11% YoY sales growth, driven by patient/test volume increases and steady margins.

5. The retail pharmacy business (Medplus and Apollo Pharmacy) is expected to continue its double-digit growth trajectory.

Overall, we foresee strong performances from Lupin, Mankind, Sun Pharma, Torrent, and Apollo Hospital, while Dr. Reddy’s, Alkem, and Max Healthcare may show more muted results.

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