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Nirmal Bang says Sun may shine despite Q4 being the worst quarter for pharma firms due to margin hit

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Nirmal Bang says Sun may shine despite Q4 being the worst quarter for pharma firms due to margin hit

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Vishal Manchanda, Pharma Analyst at Nirmal Bang Institutional Equities expects to see an improving trajectory from hereon.

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In the last quarter of FY22, the overall growth for pharma companies is estimated at 8-10 percent, according to Nirmal Bang Institutional Equities. The firm expects EBITDA (earnings before interest, taxes, depreciation, and amortisation) during the quarter would be closely watched.
The recent incremental rise in input cost due to the Russia-Ukraine war, slower movement of goods due to rising COVID-19 cases in China, hike in freight costs combined with price pressure in the US are likely to impact operating costs, hence, pressure could be seen in margins for drug manufacturers and Active Pharmaceutical Ingredient (API) companies, the firm said.
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Vishal Manchanda, a pharma analyst at Nirmal Bang Institutional Equities, expects the trajectory to improve from hereon.
“From next quarter, that is Q1FY23 onwards, we will see the companies passing on prices to customers. But in Q4FY22, the raw material prices would probably hit them the most. So, this will probably be the worst quarter for the companies in terms of the margin impact,” he said.
According to him, Sun Pharma should probably be one of the best performers in Q4FY22. However, he sees more of a flattish kind of a Q4FY22 for Dr Reddy’s Laboratories (DRL).
For the full interview, watch the accompanying video
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