Top picks: Dr Reddy's, Jubilant, Dishman Depreciated rupee, normalized generic price erosion, seasonally strong quarter in the US and focus on cost optimization will enable Indian pharma companies to post better numbers in 3QFY19. We expect our coverage companies to deliver ~8% YoY top line growth, 21% EBITDA margin (flat YoY) and 12% YoY earnings growth. This will be the second consecutive quarter with positive sequential growth in the US business, aided by softening of pricing pressure, exit of many US based companies from commodity products and the presence of a flu season. India branded revenues are also likely to grow 10% YoY and 4% QoQ. The sequential growth is solely driven by a jump in SUNPs revenues post inventory adjustment in 2QFY19. As articulated in our Jun-18 sector note, the pharma sector is recovering from US market woes and has started growing sequentially. With a few companies still in investment phase for their specialty businesses, earnings growth is still slower than anticipated. The cost rationalization efforts taken by SUNP, DRRD, CIPLA and LPC can help counter this incremental spend.