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Sun Pharma Preview: Strong specialty biz, robust domestic sales to boost company’s health in Q4

The company's specialty business is likely to post double-digit growth YoY in the quarter, despite some sequential moderation, according to brokerages.

May 26, 2023 / 06:50 AM IST
Sun Pharma office building

Sun Pharma office building

Sun Pharmaceutical Industries is likely to post strong growth numbers for the quarter ended March 2023, largely driven by its specialty business, and robust sales in the domestic market.  Some contribution from the sales of the generic of Revlimid, a drug used to treat multiple myeloma, in the US market will also aid growth.

A poll of brokerages collated by Moneycontrol pegged the drug maker's net profit for the January-March quarter at Rs 1,808.1 crore. The company had reported a net loss of Rs 2,227.38 crore in the corresponding quarter a year ago, largely on the back of a one-time loss of Rs 3,935.7 crore.

However, analysts at Philip Capital cautioned that the  unknown cost of integrating Concert Pharma, which the company acquired, could hit Q4 earnings negatively.

Regardless, on a sequential basis, net profit is seen declining from Rs 2,166 crore in the previous quarter. According to brokerages, the decline can be attributed to the impact of an import alert on the company's Halol unit.

The US Food and Drug Administration had slapped an import alert on Sun Pharma's export-oriented Halol unit in Gujarat in December 2022. The impact of this will be felt in the fourth quarter earnings. An import alert leads to the stoppage of US imports from a given unit.

The company's specialty business is likely to post double-digit on-year growth in the quarter, despite some sequential moderation, according to the brokerages.

"Growth in specialty (businesses) to continue, led by Ilumya, Cequa, and Winlevi (products manufactured by the company)," JM Financial stated in its report. The company's fortunes will also be aided by positive currency movements.

To top it up, BNP Paribas believes the domestic business should also continue to grow in double digits, led by price hikes and the integration of Curatio Healthcare.

Thus, revenue for the fourth quarter is seen at Rs 10,905.3 crore, reflecting a growth of 15 percent, from Rs 9,446.8 crore in the same period last fiscal.

Operating margins are expected to face some pressure in the quarter under review.  "Margins are expected to be lower due to higher research and development costs for Concert Pharma post-acquisition and the adverse impact of the Halol import ban," JM Financial highlighted.

Nonetheless, on an on-year basis, the EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin is expected to expand to 25.6 percent in Q4 from 23.1 percent in the same quarter of FY21-22. The EBITDA margin in the previous quarter was 26.7 percent.

The company's subsidiary, Taro Pharma, also reported its quarterly earnings recently. Its net sales stood at $146.6 million, up 2.3 percent on-year from $143.3 million in Q4 of the previous fiscal. Gross profit also declined 2.1 percent to $75.7 million, from $77.3 million a year ago.

Taro's contribution to Sun Pharma's overall sales have declined over the years, and now is at around 10 percent. Nonetheless, an uptick in Taro’s revenue can positively support Sun Pharma's topline.

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Vaibhavi Ranjan
first published: May 25, 2023 06:18 pm