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Systematix Report
For Q4 FY26, companies within Systematix' healthcare universe are expected to deliver high single-digit YoY revenue growth. However, Ebitda margins will materially correct. Median growth is estimated at ~12% for revenue and 3.6% for Ebitda, with net earnings likely witnessing a 14% decline. The primary driver of this YoY decline in net earnings is loss of exclusivity in gRevlimid, with the impact most pronounced for Dr. Reddy's, Zydus, Cipla and Sun Pharma in the descending order.
Cipla may additionally bear the brunt of supply disruption in Lanreotide. Meanwhile, Lupin and Zydus Life may see some margin pressure due to mirabegron-related (royalty payments) settlements. The quarter is likely to reflect mixed implications from the US–Iran conflict, as higher freight and raw material costs could partially offset the favorable impact of USD/INR appreciation.
If the conflict persists, these cost pressures could intensify in the coming quarters.
Active pharma ingredient manufacturers are likely to pass on the raw material inflation and may even raise prices, as formulation manufacturers look to expand their RM inventories.
Systematix expects Lupin to post the strongest YoY earnings growth (60%) within its coverage, supported by continued exclusivity in Tolvaptan (as competition is delayed).
On the other hand, Dr. Reddy's could see steepest earnings decline, as the disproportionate contribution of gRevlimid in its earnings would taper off completely.
Any potential shelf stock adjustments related to gRevlimid could further dent the company's earnings.
Sun Pharma, Cipla, Ajanta Pharma, Orchid Pharma and Rainbow Hospital are Systematix top picks in the healthcare sector.
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