A third of pharmaceutical companies miss Q2 average estimate

Almost one-third of the BSE 100 pharmaceutical companies have missed the average estimate in the quarter ended September 2018, pulled down by the lower sales and anti-trust litigation provision.

Of the seven pharma companies under the BSE 100 index, two companies missed analysts' expectations, with two beating the estimates and the three others matching them. The combined net profit of the seven pharma companies under the S&P BSE 100 has declined 33.97% in the July-September quarter over the same period last year. Revenue from operations, however, increased 3.42% year-on-year basis for these companies.

Last week, Sun Pharmaceutical Industries reported a consolidated net loss of Rs 218.82 crore in the September quarter, due to a one-off anti-trust litigation provision of Rs 1,214.38 crore.

According to brokerage estimates, Sun Pharma was expected to report a net profit of around Rs 950-1,040 crore profit. Revenue during the quarter under review increased 4% to Rs 6,937.63 crore year-on-year, lower than the Rs 7,600 crore estimated by analysts.

Cipla, too, missed the street expectations, while Cadila Healthcare, Aurobindo Pharma and Lupin managed to match it.

Cipla has reported a 11% decline in its net profit to Rs 377 crore, while net sales decline 2% to Rs 4,011.9 crore in the September quarter. Analysts expected it to report a profit of Rs 390-450 crore on net sales of around Rs 4,270- 4,290 crore. While share price of Cipla fell 13.11% since it announced its Q2 result, Sun Pharma shares fell 5.54% since November 13.

Meanwhile, Cadila Healthcare, Aurobindo Pharma and Lupin were able to match analysts' expectations. Cadila reported a 17% decline in its second quarter net profit to Rs 417.5 crore, while its revenue from operations fell 8.1% to Rs 2,961.2 crore. Analysts were expecting it to report a net profit around Rs 410-419 crore on revenue of Rs 3,050 crore.

Aurobindo Pharma, too, posted a 22% decline in its second quarter profit to Rs 611.44 crore on the back of higher expenses, though its revenue increased 7% to Rs 4,751.4 crore in the second quarter. Lupin's net profit in the second quarter plunged 41.5% to Rs 265.98 crore, due to decline in the US business and rising manufacturing costs. Revenue from operations during the quarter was flat at Rs 3,951.06 crore against Rs 3,951.96 crore in the corresponding period last fiscal.

Analysts on an average have expected Aurobindo to post a profit of Rs 600-780 crore, while Lupin to post a profit of Rs 265-273 crore on flat revenue.

On the other hand, Dr Reddy's Laboratories and Divi's Laboratories reported stellar second quarter performance, beating brokerages' estimates. Dr Reddy's reported a 77% increase in its net profit to Rs 503.8 crore on a year on year basis against analysts' expectation of Rs 330-370 crore. Net sales rose 7% on a yearly basis to Rs 3,797.8 crore compared to an estimate of Rs 3,783-3,858 crore.

Divi's Laboratories, too, reported a 92% increase in net profit to Rs 397.65 crore in the second quarter on a yearly basis. Its revenue from operations grew 44% at Rs 1,285 crore during the quarter under review. This surpassed brokerage estimates as analysts were expecting it to post net profit of Rs 250-258 crore on revenue of Rs 997-1020 crore.

According to an analyst, who does not wish to be named, the pharma stocks will not be under pressure, with valuations of some of the companies quite compelling. But despite the sector looking decent at the moment, one needs to wait at least one quarter to see any upside, this person added.  

The article was published in DNA as 'A third of pharma firms miss Q2 estimates'