Sun Pharma Q4 preview: Strong speciality drug sales, Revlimid contribution, domestic growth to aid earnings

Sun Pharma is due to report its fiscal fourth quarter results on May 22.

Sun Pharmaceutical Industries is expected to post a 22 percent increase in earnings in the January-March quarter, driven by strong sales of its specialty drugs, contribution from blockbuster generic cancer drug Revlimid and resilient growth in the domestic market.

Sun Pharma's Q4 net profit is likely to climb to Rs 2,412.60 crore from Rs 1,984.50 crore in the year ago period, according to a poll of eight brokerages collated by Moneycontrol. The company is slated to report its Q4 results on May 22.

Revenue is likely to grow almost 12 percent to Rs 12,241.25 crore from Rs 10,930.60 crore a year earlier, according to the poll.

Sharekhan had the most bullish earnings target for Sun Pharma, while Kotak Institutional Equities pegged the least growth.

Strong speciality and US sales 

Sun Pharma's high-margin, low-competition speciality segment will continue to drive growth in Q4. Brokerage SMIFS attributed the growth in Sun Pharma's speciality segment to a ramp-up in prescription volumes for dermatology drugs Ilumya, Winlevi, and Odomzo.

ICICI Securities expects Sun Pharma's speciality portfolio sales at $284 million in Q4, driven by Ilumya and Winlevi.

"Sun Pharma is increasing its contribution towards speciality drugs where it faces lesser competition and can command premium prices," Sharekhan said in its report.

In addition, blockbuster cancer drug Revlimid will remain a significant contributor to Sun Pharma's US sales. JM Financial pegged a $30 million contribution from Revlimid in Q4.

The resumption of supplies from the drugmaker's Mohali plant, which was caught in regulatory snags, will aid Sun Pharma's US sales.

Steady domestic growth

Aside from its US sales, Sun Pharma is expected to deliver mid-teen growth in its India revenue. Nomura expects the company's growth in the domestic formulation segment to remain ahead of the broader market.

Most brokerages anticipate a 11-15 percent on-year rise in Sun Pharma's sales from the India formulation segment.

However, the company's EBITDA margin may moderate slightly on account of weak seasonality in the speciality segment and higher research and development spending.

Kotak Institutional Equities anticipates Sun Pharma's R&D spending to come in at about 7 percent of revenue in Q4, up 30 basis points from the previous quarter.

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