Viewcube

Vitality in vitals

 

Key messages

 

Revenue to grow 8-10% (in rupee terms) this fiscal, compared with ~9% last fiscal

 

  • Price hikes across therapy segments to drive domestic growth; volume to remain moderate
  • Pricing pressure in the US to gradually abate; demand from semi-regulated markets to recover after the decline last fiscal
  • Bulk drug exports to grow ~8% in rupee terms as companies look to reduce supply chain risks

Production-linked incentive (PLI) scheme to bolster domestic availability of active pharmaceutical ingredients (APIs), formulations

 

  • The PLI scheme and bulk drug parks to strengthen the domestic API industry and reduce dependency on China by 15-20%
  • Opportunities in the formulations segment to enhance research and development (R&D) spend and capital expenditure (capex)

Emerging opportunities in overseas markets to aid industry growth in the long term

 

  • Launch of new products and entry into low-competition products to offset the impact of pricing pressure in the US
  • Diversification into other regulated markets and pharmerging markets to support growth in exports
  • Focus on customised synthesis and API supply to branded products to boost bulk drug exports

 

Operating profitability to improve by 50-100 basis points this fiscal after years of moderation; seen stabilising at 21.0-21.5%

 

  • Decline in raw material and freight costs, along with new product introductions, to enhance profitability
  • Abating pricing pressure on generics in the US to also have a positive impact

Credit quality to remain stable because of strong balance sheets

 

  • Working capital cycle to shorten with inventory holding returning to the pre-pandemic level
  • Moderate organic capex with marginal uptick because of capex under the PLI scheme to keep debt metrics healthy
  • Healthy liquidity and strong balance sheets to support potential acquisitions