Pharma Sector Q4 Results Preview

The Pharma sector is all set to report a good set of numbers in the fourth quarter of FY13. The weak currency, launch of new products in the US markets, improved market share and recovery in the domestic markets have all aided the sector in giving a good performance for the quarter. Stocks of Sun Pharma, Lupin and Dr Reddy's Labs have already shown positive trends indicating that investors have been tracking the developments in the sector.

Here are some stock specific comments on a few companies:

Glenmark – Glenmark, in the third quarter of FY13, reported superb growth led by higher out licensing income as well as growth in the generics business. The momentum will sustain in this quarter as well. The company, during the quarter, received US FDA approval for Rizatriptan Benzoate, Crofelemer 125 mg and Mupirocin Calcium. It has also launched Atovaquone Prognanil in the UK thus adding to its revenues. The stock has gathered a positive momentum and even at the current levels, it seems like a good investment.

Dr Reddy's Laboratories – Dr Reddy's Labs has launched a few products in the US market and are enjoying a good market share indicating that the company will come up with a good financial performance in the fourth quarter. It will also show some clarity on Octoplus acquisition. Investors should note that the company had seen higher sales of generic of Zyprexa in Q4FY13. This high base impact will influence the Q4FY13 numbers of the company. One must observe the base business growth which will give a real picture of the business growth.

Sun Pharma – Sun Pharma has been a top performing stock in the pharma sector. Although the company hasn’t had a major launch in the quarter, it will still witness fantastic growth due to the consolidation of Dusa and URL pharma which it acquired in 2012. Besides, due to recovery in the domestic business, one can expect a good show there too. The stock has reached a high level but long-term investors need not to wait for a fall as the stock is a good bet.

Aurobindo Pharma – The stock has seen a sharp run up in the last 2 weeks after it has seen lifting of the ban by US FDA on its Unit VI. Besides, there was a strong momentum on the approvals front and the company has also launched Valsartan and Hydrochlorothiazide in the quarter, which is a blockbuster drug. The stock is an attractive bet to enter.

Lupin – The shares of Lupin are also trading at an all-time higher range on investors' optimism. It had reported fantastic earnings in Q3FY13 over strong growth in revenues in the US, Japan and South Africa. The same is expected to continue in the fourth quarter and the stock remains a good bet from mid to long-term perspective.

Strides Arcolab– A lot is expected from the company since it sold its sterile business. The stock is at a high level, thus giving room for anticipating huge dividends. It has seen a 24% decline in value this year. As there is nothing left in the stock, it should best be avoided.

Ranbaxy – Ranbaxy is most likely to report lower revenues and profits due to the high base impact and drug recall of Atorvastatin. No big drug launch took place in the quarter. The stock is cheaper on valuation but its position looks pretty ambiguous. The management commentary following the result would guide future course.

Cipla – Cipla in Q3FY13 saw a topline growth of 18% and a bottomline growth of 25.5%. Its international formulation business did well while API saw a growth of 16%. The company has been in the process of acquisition of Medpro in South Africa but it has not tasted success yet. No surprises are expected from the company.

Wockhardt - The company may announce the progress of its CDR exit. The numbers in the last many quarters have been quite good with each quarter showing a surge in the margins. The story will continue in the quarter as well. On the valuation front, the stock looks very attractive and is hence a good buy.