• We expect the growth momentum for the India Healthcare sector will continue to remain strong. Strong domestic pharma market growth, limited competition launches in the US along with currency depreciation will lead the 25%+ growth. Even operating margins should improve for most of the companies with rupee depreciation. A few headwinds which can dampen the growth are MTM forex losses (due to sharp depreciation)

• We expect strong revenue growth for all the large-cap companies and in mid-cap out performance would be led by Glenmark and Ipca lab. Aurobindo is also expected to report good set of numbers on a lower base. But, continued operational and legal problems at Aurobindo will cap the out-performance by the stock.

• We expect large cap to report strong growth in revenues, led by higher realizations and niche product launches in the US. Ranbaxy’s growth would be aided by Lipitor sales (one month) and Cipla should be benefited with its Lexapro formulations supply to Teva. We expect Sun pharma to post revenue growth of 36% yoy led by strong domestic and US growth (led by Stalevo and Lipodox), which is also backed by Taro. Dr Reddy’s is expected to clock in revenue growth of 40% yoy led by improvement in domestic and PSAI segment. We expect 43% yoy growth in revenues for Ranbaxy with margin improvement led by Lipitor launch (one month sales). We estimate Cipla to post 27% yoy growth on a lower base in revenues with supply optimizing from Indore SEZ and supply of Lexapro formulations to Teva.  

• Our top picks are Cipla and Ipca Lab.

Q1 FY13 estimates

* December ending financial year