Currently, Nifty Pharma 1-year forward PE is 28.0x which is close to a 3-year average. This suggests that the sector is currently fairly valued, however, DRChoksey expects upside potential may be stock-specific, driven by execution on margin improvement, differentiated product launches, or geographic diversification.
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DRChoksey Report
In Q4 FY25E, we expect double-digit YoY revenue growth from the pharma companies in our coverage. The revenue is expected to grow 11.5% YoY (+1.4% sequentially), driven by new product launches across geographies, expansion in domestic formulations, and continued momentum in emerging markets and Europe.
Notable companies which post strong revenue growth are as follows, Divis Laboratories (sustained double-digit growth in the Custom Synthesis segment), Supriya Lifescience (focus on launching new products in niche therapy areas), and Sun Pharma (Odomzo, Ilumya growth and India launches driving momentum.)
Ebitda is expected to grow at a robust rate of 16.1% YoY and decline 1.5% sequentially. Ebitda margin is expected to expand 99 bps YoY (-72 bps QoQ), led by a shift toward higher-margin therapies, and improved product mix, with a higher share of specialty, complex generics, and branded formulations across key geographies.
Laurus Labs, Lupin, and Sun Pharma are expected to post strong margin expansion among our coverage supported by late-stage projects, a better product mix including complex generics, and higher-margin speciality drugs respectively.
Alembic Pharma and Zydus Lifesciences are expected to post weak margin growth among our coverage due to an increase in operating expenses.
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