Pharma Stocks Outlook for the week - 07 to 11.08.2017

Pharma Stocks Outlook for the week - 07 to 11.08.2017

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Pharma Stocks Outlook for the week - 07 to 11.08.2017 )

The Earnings of pharmaceutical companies will be the key trigger for stocks in the sector next week. Major drug makers like Sun Pharmaceutical Industries, Cipla, Aurobindo Pharma and Cadila Healthcare among others will report their Apr-Jun results. The Pharmaceutical companies are seen reporting dismal numbers for the June quarter as destocking before the introduction of goods and services tax is seen weighing on their domestic operations. In the US, their largest market, we expect topline to be weighed down by fewer approvals and price erosion on account of consolidation of distribution channels and increasing competition. Appreciation of the rupee is also seen weighing on earnings in the exportoriented sector. However, we believe that the issues which are seen weighing on the companies' earnings are factored in the stocks' prices. On the business front, while most of short-term negatives for the sector on US generic pricing pressure appear to be priced in, industry fundamentals continue to weaken structurally. In the near term, higher R&D (research and development costs) for building pipeline and technologies will squeeze margins, but we believe
Specialty and quality pipeline will be the key drivers for future revenue growth and EBITDA (earnings before interest, tax, depreciation and amortisation) margin expansion. On Wednesday, Aurobindo Pharma will post its Apr-Jun earnings. The Hyderabad-based company is expected to report a 4% fall in its consolidated net profit to 5.61 bln rupees.

Source : Cogencis Information Services Ltd.