Indian Pharma Industry Expected to See 8.5% Revenue Growth Driven by Domestic and US Markets
Axis Securities Report Highlights Positive Trends for Q2 FY25 The Indian pharmaceutical industry is poised for a robust year, with revenue growth projected at 8.5% year-on-year (YoY) for the second quarter of FY25, driven primarily by
Axis Securities Report Highlights Positive Trends for Q2 FY25
The Indian pharmaceutical industry is poised for a robust year, with revenue growth projected at 8.5% year-on-year (YoY) for the second quarter of FY25, driven primarily by domestic formulations and strategic niche launches in the US market. This optimistic outlook comes from a recent report by Axis Securities, which forecasts a collective revenue increase of 3.1% quarter-on-quarter (QoQ) among covered companies.
Strong Earnings Ahead
According to the report, key financial metrics are set to improve alongside revenue growth. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is anticipated to rise by 10.5% YoY and 3.8% QoQ, while adjusted Profit After Tax (PAT) is expected to grow by 14% YoY and 1% QoQ. This financial optimism indicates a healthier bottom line for many industry players.
Market Dynamics Favor Growth
The report highlights a promising rebound in the Indian market, particularly in chronic therapies, complemented by a resurgence in acute therapies. Major companies such as Dr. Reddy’s, Cipla, and Aurobindo are projected to report significant gRevlimid sales for Q2 FY25, with estimates of USD 125 million, USD 30 million, and USD 30 million, respectively.
Moreover, an expected improvement in profit margins of 40 basis points YoY is forecasted for most companies. This margin enhancement is attributed to a favorable quarter for domestic formulations, stable freight costs, and consistent Active Pharmaceutical Ingredient (API) prices. The shift toward a more advantageous product mix, particularly with niche launches, is also anticipated to contribute positively.
API Price Dynamics
The report notes that the rise in API prices will be driven by volume growth and supply chain adjustments, particularly from China. Additionally, the decrease in crude prices and stabilized shipping rates in Q2 FY25 are expected to support margin maintenance for pharmaceutical companies in the near term.
Healthcare Sector Growth
In the broader healthcare sector, a revenue growth of 9.4% YoY and 4.5% QoQ is anticipated, bolstered by improved occupancy rates and a projected 5-6% growth in Average Revenue Per Occupied Bed (ARPOB). Companies such as KIMS and HCG are expected to report a 12% growth on a YoY basis. However, Medanta faces challenges, as its Lucknow facility is projected to see a 10% decline in occupancies, impacted by a slowdown in acute cases compared to the previous year.
Conclusion
Overall, a moderate revenue growth of 5% YoY is expected, supported by the mature hospital market in Gurgaon. In terms of profitability, an adjusted EBITDA growth of 10.8% YoY and 7.4% QoQ is anticipated for hospital coverage. These insights reflect a promising landscape for the Indian pharmaceutical and healthcare sectors as they navigate the complexities of a recovering market.