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Q4FY24 preview: Hospital companies to deliver 20% YoY growth

We expect pharmaceuticals companies under our coverage to report another strong quarter with Ebitda growth of 22% YoY (down 3% QoQ) mainly aided by-

  • new launches (gRevlimid, gSpiriva, etc) in U.S. market,
  • steady domestic business and
  • higher margins.

We expect the quarter to continue seeing easing of cost pressures which will thereby aid margins YoY. The companies are likely to witnessed steady base business in U.S. given stable generic pricing environment coupled with new launches.

On domestic formulation business; given seasonal weakness acute and trade generic business to remain soft while chronic business to have steady growth.

Our top picks remain Sun Pharmaceutical Industries Ltd., JB Chemicals and Pharmaceuticals Ltd., Eris Lifesciences Ltd. and Torrent Pharmaceuticals Ltd.

Hospitals: Seasonally healthy quarter
Buoyed by historical trend of Q4 being a seasonally strong quarter for hospitals, we anticipate hospital companies to deliver healthy YoY growth in Q4 FY24. This growth likely to be driven by higher average revenue per occupied bed and steady occupancy.

On sequentially basis we anticipate flat to 400 basis points increase in occupancy due to seasonality. We foresee ARPOB to continue to remain elevated on a YoY basis. Overall, we expect ~20% YoY growth (+7% QoQ) in post IND Accounting standard Ebitda (excluding of Rs 1.48 billion loss in Apollo 24*7, Ebitda growth expected at +14% YoY) in Q4 under our coverage universe.

We remain structurally positive in the hospitals space and expect momentum to continue with-

  • improvement in occupancy,
  • better case- payor mix and
  • new capacity additions.

Our top picks in the sector are Max Healthcare Institute Ltd., Jupiter Life Line Hospitals Ltd. and Aster DM Healthcare Ltd.

For full results click. Prabhudas Lilladher

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