The research report says that on an aggregate basis, it expects yoy revenue growth of 3% and largely flat EBITDA and adjusted PAT. Revenue growth should be largely driven by growth in the domestic formulations business due to the recovery in the acute segment and low base from the last year. It expects EBITDA margin compression of 100bps yoy due to the normalization of marketing and promotional activities in branded markets. On a qoq basis, it expects revenues, EBITDA and PAT to decline by 2%, 7% and 14%, respectively, due to the absence of the Covid tailwind. PAT decline should also be impacted by Lupin’s recognition of out-licensing income of US $ 50mn in Q1.

Marginal growth in US business

The brokerage’s coverage universe’s US revenue is expected to grow at 2% sequentially, driven by new generic product launches and the ramp-up of speciality products for Sun Pharma, partially offset by the price erosion in the generics business. Dr. Reddy’s is expected to post the highest growth qoq within the coverage companies, driven by the ramp-up in key products such as Vascepa and Kuvan, and the launch of three new products. Lupin, Cadila and Sun Pharma are expected to post 2-3% sequential growth in their US revenue. Lupin has seen a healthy offtake in Albuterol and has gained market share by 500bps, while Cadila has also gained a modest market share in Asacol and launched three new products. Sun Pharma’s speciality molecules such as Ilumya and Cequa have seen good sequential pick-up, while Absorica continues to lose market share.

However, the research report indicates that some of the lost market share in Absorica will be captured by AG and will be reflected in the US generics business. Cipla has seen a marginal gain in Albuterol market share. However, it expects the company to report flat US revenue sequentially. Aurobindo is the only company that has seen a high number of launches in Q2 but price erosion in its base business is likely to keep its growth restricted. On a yoy basis, it expects a 3% decline in the coverage universe, largely driven by the decline in Aurobindo and Cadila’s US revenues. Aurobindo’s revenue decline is due to the divestment of the nutraceutical business.

India revenue to grow in high teens

Secondary sales data from IMS suggest that the India Pharma Market (IPM) has grown at 17% in the first two months of Q2FY22, driven by the low-base effect of last year. It expects the companies in its coverage universe to grow 8-20% yoy in Q2. Ipca is expected to grow 20%, driven by the recovery in the anti-infective and anti-malarial segment, coupled with strong growth in the pain segment. Sun Pharma and Lupin are expected to grow in the mid-teens on the back of a recovery in their acute portfolio and low base from last year. Dr. Reddy’s is expected to grow at 12% on healthy growth in its acute portfolio. Emkay expects a relatively modest quarter for Cipla due to the high base of Q2FY21.

Opex to increase

Emkay expects other expenses to increase by 7% qoq and 9% yoy due to the normalization of sales and promotional activities in the branded business. As a proportion of revenue, other expenses should inch up by 170bps qoq and 100bps yoy. Except for Aurobindo, all other companies under its coverage should witness other expenses sequentially. In Q1FY22, other expenses were lower due to Covid-related restrictions. It expects employee expenses and R&D expenses to remain largely stable sequentially.

The companies covered in the Emkay report are Aurobindo Pharma, Cadila Healthcare, Cipla, Dr Reddy’s Lab, Ipca lab, Lupin and Sun Pharma.