IPM posted healthy 9.8% yoy growth in May 2024, led by improved traction in the acute segment. With the 8.9% yoy growth reported in April 2024, the initial trends in FY2025E suggest better prospects after a lackluster FY2024. However, similar to April 2024, a chunk of the improved performance in the month can be attributed to pricing growth; we highlight that volume traction in the end-market is still below normal. Buoyed by improved field force productivity across most companies, price hikes in the non-NLEM portfolio, new launches and higher sales from other channels, we are currently baking in 10-13% yoy organic domestic sales growth in FY2025E for our coverage.
Glenmark, JB & Ajanta growth leaders; Pfizer, Indoco & GSK lag in May 2024
IPM grew 9.8% yoy in May 2024 on a base of 10.2% yoy growth in May 2023. While chronic therapies grew 11% yoy, acute therapies grew 9% yoy in May 2024. Bulk of the IPM growth in May 2024 was driven by therapies such as oncology, vaccines, urology, gastrointestinal, cardiac, derma and VMN. In May 2024, revenues of domestic companies grew 10% yoy, compared with 8.5% yoy growth for MNC companies. Including unlisted companies, growth leaders in May 2024 were FDC, Glenmark, Macleods, JB, Ajanta, Sanofi, Zydus, Mankind and Eris, which posted 11-20% yoy sales growth. On the other hand, key underperformers during the month were Pfizer, Indoco, GSK, Ipca, Micro Labs and Alembic, which posted 1-7% yoy growth.
Recent market share trends: TRP & Abbott top gainers; Cipla & GSK top losers
IPM growth of 7.4% yoy in MAT May 2024 (on a base of 11.5% yoy) was led by 410 bps yoy contribution from higher pricing, 40 bps yoy contribution from volumes and 290 bps yoy contribution from new launches. We highlight that sluggish volume trends remain a worry. Among the top-25 companies, FDC, Torrent, Abbott, Lupin, Intas, JB, USV and Zydus have gained maximum share over the past six months. On the other hand, Cipla, Aristo, GSK, Alembic, Pfizer, Alkem, Glenmark and Sun have lost a maximum share in the past six months.
Risk of further acceleration in generics adoption not adequately baked in
Factoring in the volume impact from the trade generics and Jan Aushadhi channels, we estimate a 70-110 bps annual dent on branded IPM growth, at least until FY2028E. With Jan Aushadhi's rapid expansion, there is a risk of this hit on IPM swelling further. As seen earlier and more recently with NMC, the government is keen on pushing generics. Currently, most domestic businesses are trading at an implied valuation of >30X FY2026E EPS for acute-heavy companies and >35X FY2026E EPS for chronic-heavy companies. We note that current valuations imply the ongoing steady decline in the share of branded generics will continue and do not factor in any further growth deceleration in the next few years. If the share of branded products slips faster, there is scope for derating. Yet, as highlighted in our recent reports, a forced change might be ineffective unless the quality conundrum is addressed. |
