Sun Pharma share price under pressure after surprise Q4 loss but CLSA expects 22% upside. Here's why

Sun Pharma: Company incurred loss during the quarter compared to profit a year ago; revenue growth at 11 percent on year. The pharma major recorded loss of Rs 2,277.2 crore for the quarter ended March 2022 dented by exceptional loss, against profit of Rs 894.1 crore in same period last year. EBITDA increased by 14.6 percent YoY to Rs 2,279.7 crore in Q4FY22. Revenue grew by 11 percent YoY to Rs 9,446.8 crore in Q4FY22 with India formulation sales rising 16 percent, US formulation growth of 5 percent, emerging markets formulation sales increasing 7 percent and Rest of World formulation sales rising 7 percent YoY.

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Sun Pharmaceutical Industries share price was down a percent in the morning session on May 31, a day after the company declared its Q4 earnings.

The pharma firm on May 30 reported a surprise loss for the quarter ended March 2022 (Q4FY22), hit by one-time charges.

The Mumbai-based company posted a net loss of Rs 2,227.38 crore for the quarter under review, compared to the net profit of Rs 848 crore a year ago. Revenue for the quarter rose 11 percent from a year ago to Rs 9,386.08 crore.

Exceptional items for the quarter stood at Rs 3,935.75 crore against Rs 672.81 crore last year. Exceptional items include settlements, and provisions related to Taro Pharmaceuticals, and Ranbaxy.

Sun Pharma’s sales in the US, which accounted for 31 percent of the total sales, rose 5 percent on-year to $389 million. The drug maker’s sales in India were up 16 percent at Rs 3,095.60 crore, while sales in emerging markets grew 7 percent to $206 million in the quarter under review.

During the quarter, Taro posted sales of $143 million, down 3 percent year-on-year, and a net profit of about $27.4 million, down 11.6 percent.

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The firm reappointed Dilip Shanghvi as managing director for a further term of five years and Pawan Goenka was appointed lead independent director with immediate effect. Gautam Doshi was also reappointed as an independent director for the second term.

At 9:41am, Sun Pharmaceutical Industries was quoting at Rs 881.05, down Rs 7.05, or 0.79 percent. It has touched an intraday high of Rs 882.80 and an intraday low of Rs 857.10.

CLSA has a 'buy' call on the stock with target at Rs 1,080 per share, an upside of 22 percent from current market price. "FY23 revenue guidance was in-line with expectations led by specialty ramp-up. Normalisation of expenses and higher input costs impact profitability. Strong India performance but most other geographies undershot expectations. Raise FY23-24 earnings estimates by 2-3 percent," it said.

Credit Suisse has a 'neutral' call with target at Rs 810 per share. "The firm posted weak margin in Q4; FY23 revenue guidance was lower than expected. Guidance implies growth of 8-10 percent on the base business," the research firm said.

Morgan Stanley has maintained its 'overweight' call on the stock with target at Rs 1,002 per share. The brokerage firm expects continued growth in India and emerging markets. US should benefit from specialty scale up as well as niche launches. These, along with price increases, should offset cost headwinds, it said.

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