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Pharma Sector Faces Margin Squeeze, Hospitals & Diagnostics Show Growth

HDFC Securities forecasts moderate revenue growth with flat EBITDA margins for India's pharma and healthcare sector in the March quarter. The pharma segment faces a 110 basis point margin contraction due to US pricing pressure and higher costs, despite a 10% sales increase led by the domestic market. Conversely, the hospital and diagnostics businesses are projected for robust 15% year-on-year growth. The US generics market is expected to decline sequentially, offset partially by traction in new key products.

Key Points: Pharma Margin Pressure, Hospital Growth: HDFC Securities Q4 Outlook

  • Pharma sales up 10% but margins pressured
  • Hospital business to grow 15% YoY
  • US generics market faces QoQ decline
  • Diagnostics segment sees 15% growth and margin expansion
2 min read

Pharma and healthcare companies to face continued margin pressure: HDFC Securities

HDFC Securities projects flat EBITDA margins for pharma in Q4, with 11% sales growth. Hospitals and diagnostics to see 15% growth, while US generics decline.

"EBITDA margins for the pharma segment are expected to come down (-110bps YoY) - HDFC Securities Report"

New Delhi, April 12

The Indian pharmaceutical and healthcare sector is expected to see moderate revenue growth, with EBITDA margins remaining flat, in the March quarter, according to a brokerage report by HDFC Securities. "We project sales/EBITDA growth of 11%/6% YoY for our coverage universe," the brokerage added.

The pharmaceutical companies are expected to see 10% YoY sales growth, driven by a 15% YoY increase in the India business. However, this growth will be offset by a 5% QoQ decline in the US formulations due to pricing pressures and the absence of gRevlimid sales. "EBITDA margins for the pharma segment are expected to come down (-110bps YoY), with an increase in input cost, price erosion in the US, absence of gRevlimid, steady R&D, and higher SG&A," said the report.

The hospital business is projected to grow by 15% YoY during the reporting quarter, driven by steady occupancy and ARPOBs and bed capacity addition. The diagnostics segment is expected to post 15% YoY sales growth, driven by volume increases leading to moderate margin expansion. The retail pharmacy business is expected to see strong growth, with Medplus expected to see 22% YoY growth and Apollo HealthCo expected to see steady 20% YoY growth.

"The US generics market is likely to decline QoQ due to the absence of gRevlimid sales and pricing pressures in the base business," said the report. However, there is expected to be some traction in key products such as gJynarque, gSpiriva, and gMyrbetriq.

The Indian pharma market is expected to have seen steady growth of 12% in Jan/Feb'26, led by strong 16% growth in the chronic segment and ~9% growth in the acute segment. "We expect our coverage universe to see 15% YoY growth in India business on the back of traction in the speciality portfolio and chronic," the brokerage said in its report.

The research report by HDFC Securities noted that margins will remain under check due to an increase in input costs, pricing pressures in the US business, absence of high margin gRevlimid, steady research and development, and higher selling, general, and administrative expenses. The Contract Research, Development, and Manufacturing Organisation business is expected to sustain its margins as new capacities mature, while the hospital business could see some pressure on lower international payor mix and new bed additions.

- ANI

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Reader Comments

R
Rohit P
The US market dependency is a double-edged sword. Good that our domestic business is growing at 15%, we need to focus more on India and other emerging markets. Atmanirbhar Bharat should also mean strong domestic pharma innovation, not just generics for the West.
A
Aman W
Medplus and Apollo Pharmacy growing at 20%+ YoY is impressive! 🚀 It shows the organized retail pharmacy model is finally getting its due in India. Convenience and trust are big factors for families like mine.
S
Sarah B
The report mentions steady R&D spend despite margin pressure. That's the key long-term view. Indian companies must invest in novel drugs and complex generics to move up the value chain. Short-term margin pain for long-term gain is acceptable.
K
Karthik V
With all due respect to HDFC Sec analysis, these quarterly projections often miss the mark. The real issue is the insane price erosion in the US. Our companies fought the pandemic, but now they're squeezed between raw material costs and foreign pricing pressures. Government should look at PLI schemes more seriously for APIs.
M
Meera T
The growth in hospitals and diagnostics is a sign of improving healthcare infrastructure, which is good. But I hope this expansion also reaches tier 2 and 3 cities, not just metros. Affordable quality care is needed everywhere.

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