Sun Pharma profit may decline 10% in Q3 on poor operating performance

A Moneycontrol poll of brokerage houses has pegged the third quarter FY23 consolidated revenue of Sun Pharmaceutical Industries, the country's largest pharmaceutical company by volume, at Rs 11,028 crore, making a 12 percent on-year growth. The company will report its December quarter earnings on January 31.

The decline in bottomline estimated at 10 percent sequentially could be caused by a tepid operating performance for the reporting quarter, with the fall in EBITDA (earnings before interest, tax, depreciation and amortisation) estimated at 5 percent on-quarter to Rs 2,891 crore due to higher R&D (research and development) spend.

The company’s India business is expected to witness a steady growth in the range of 10-11 percent on-year, aided by continued demand across its chronic portfolio. The US business, however, will grow in lower single digits, according to analysts as BNP Paribas.

What brokerages say

“We expect the US business to grow in lower single digits QoQ, led by a ramp-up in specialty products, with the generics segment remaining subdued. Domestic formulations are expected to grow in high double digits. The EBITDA margin would be maintained above 25 percent, aided by a ramp-up of specialty products in the US,” the BNP Paribas research report said.

ICICI Securities assumes a 3.5 percent on-quarter growth for the US business, with projected sales at $427 million, driven by recovery in the sales of Taro, which is Sun Pharma’s US subsidiary.

For the EM (emerging markets) and RoW (the rest of the world), the brokerage firm expects a growth of 10 percent and 7 percent, YoY, respectively.

Kotak Institutional Equities gives a combined growth rate of 8 percent YoY for the ROW/EMS segment. “We expect SUNP (Sun Pharma) to deliver a steady Q3FY23 with 11 percent YoY topline growth. We are building in $410 million US sales (down 0.5 percent QoQ) in Q3FY23, driven by lower sales from Halol, which is being offset by a gradual ramp-up in its specialty portfolio.” it said.

The brokerage house added that Ilumya (plaque psoriasis), Cequa (chronic dry-eye) and Odomzo (basal cell carcinoma) have been scaling up well, while Levulan (Actinic keratosis) sales are expected to pick up in a seasonally strong quarter.

Sun Pharma’s Halol facility is based in Gujarat and produces finished pharmaceutical products.

“While secondary sales data suggests Winlevi sales have slightly improved sequentially, the extent of recovery is lower than our expectations. Sun's market share has inched up further in gPentasa and gCiprodex. We build in 10 percent and 8 percent YoY growth in India and ROW/EMs, respectively, in Q3FY23.” Kotak said in its preview note.