Pharma, Healthcare Q4 Results Preview: FY25 To End With Steady Growth, Better Margin, Says HDFC Securities

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HDFC Securities Institutional Equities

The India Pharma and Healthcare sector is expected to see steady growth and margin improvement during Q4 FY25E. We project sales/Ebitda growth of 13%/19% YoY for our coverage universe. Our assumptions are:

1. pharma coverage will see 12% YoY sales growth, driven by a 14% YoY increase in the India business along with 7% QoQ growth in the US sales (+7% YoY). In the US, price erosion in base business will be offset by steady traction in key products (gSpiriva - Lupin, gMyrbetriq – Zydus and Lupin), the specialty scaleup (Sun Pharma) and gRevlimid sales (Dr Reddy’s, Zydus, Aurobindo, Sun).

2. Ebitda margins for the pharma segment are expected to expand by 135 bps YoY, driven by growth in key markets (India and US) and better product mix (gRevlimid and stable input costs to drive gross margin expansion of ~71 bps YoY), as well as decline in freight costs (-11% YoY and -10% QoQ). This will be partly offset by an expected increase in R&D.

3. The hospital business is projected to grow by 18% YoY, as muted occupancy (festive season) will partly be supported by steady average revenue per occupied bed, and merger and acquisitions (Max Healthcare). Ebitda margin expansion is expected for Apollo Hospital due to reduced spending on Apollo 24/7, while Max Healthcare may see a margin decline due to integration impact of acquired hospitals.

4. The diagnostics segment is anticipated to deliver 8% YoY sales growth, driven by patient/test volume increases while rising input costs and M&A costs will have some impact on margins.

5. The retail pharmacy business (Medplus and Apollo Pharmacy) is expected to see steady growth.

Overall, we foresee strong performances from Lupin, Ipca Labs, and Apollo Hospital, while Aurobindo and Max Healthcare may show muted results.

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