will government's massive surge in investment ... - Myiris.com
will government's massive surge in investment ... - Myiris.com
will government's massive surge in investment ... - Myiris.com
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Apr-Jun 2013 Earn<strong>in</strong>gs Preview<br />
Depreciation of INR aga<strong>in</strong>st major currencies to boost topl<strong>in</strong>e but<br />
cast shadow <strong>in</strong> PAT for <strong>com</strong>panies with forex debt<br />
Rupee has depreciated by 6.4% YoY aga<strong>in</strong>st the USD and 3.7% YoY aga<strong>in</strong>st Euro.<br />
This would benefit sales growth for frontl<strong>in</strong>e pharma <strong>com</strong>panies with high exposure<br />
to US and EU exports. The benefits would however limited to <strong>com</strong>panies with lower<br />
hedge of USD/Euro exports. Hence, the benefit would not be available to Dr. Reddy’s<br />
Labs and Ranbaxy as those <strong>com</strong>panies have significant hedge <strong>in</strong> foreign currency.<br />
The <strong>com</strong>panies with limited hedge such as Lup<strong>in</strong>, Sun Pharma, Glenmark, Cadila and<br />
Cipla to benefit vis-à-vis peers as they cover hedge only 20-30% of quarterly sales.<br />
Further, the <strong>com</strong>panies with significant foreign exchange debt such as Aurob<strong>in</strong>do,<br />
Jubilant Life and Zydus Cadila would expect strong MTM loss to erode benefit of<br />
forex at operat<strong>in</strong>g profit.<br />
YoY and QoQ INR depreciation v/s USD and Euro to partially boost revenues but PAT to have different impact on foreign currency borrowers<br />
110<br />
USD-INR<br />
EUR-INR<br />
112<br />
USD-INR<br />
EUR-INR<br />
108<br />
100<br />
104<br />
100<br />
90<br />
96<br />
Jun-12<br />
Jul-12<br />
Aug-12<br />
Sep-12<br />
Oct-12<br />
Nov-12<br />
Dec-12<br />
Jan-13<br />
Feb-13<br />
Mar-13<br />
Apr-13<br />
May-13<br />
Jun-13<br />
Apr-13<br />
May-13<br />
Jun-13<br />
Source: Bloomberg, PL Research<br />
New Pharma Pric<strong>in</strong>g Policy (NPPA) to impact India formulation sales<br />
Government has announced new pharma pric<strong>in</strong>g policy (modified) to be<br />
implemented from July 1, 2013 post approval from Union cab<strong>in</strong>et. The new policy<br />
which was modified to fix ceil<strong>in</strong>g price for 348 drugs <strong>in</strong>creased from 75 drugs<br />
covered by National List of Essential Medic<strong>in</strong>es (NLEM) 2011 based on simple<br />
average price (v/s weighted average price earlier) of all the brands hav<strong>in</strong>g market<br />
share of more than 1% market share. The government has released suggested ceil<strong>in</strong>g<br />
price of 190 drugs out of 348 drugs under new NLEM to be applied from July 1, 2013.<br />
With<strong>in</strong> our coverage, Glenmark and Dr Reddy’s Lab to be the least affected while<br />
Cipla and Zydus Cadila to be the most impacted.<br />
The key highlights of the new pric<strong>in</strong>g policy are:<br />
! Market based pric<strong>in</strong>g policy to be positive <strong>in</strong> long term vs cost based pric<strong>in</strong>g <strong>in</strong><br />
previous NLEM policy<br />
! The ceil<strong>in</strong>g price would be based on simple average price of all formulations<br />
with market share more than 1% ( as of May-2012)<br />
July 8, 2013 143
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