Sun Pharma shines with 19% growth in net profit

Sun Pharma, India’s largest pharma company by market cap, posted a robust performance for the quarter ended 30th September, 2011. On a standalone basis, the company reported 18% and 27% growth in its revenues and net profits respectively on a YOY basis. On a consolidated basis, the revenues grew by 42% to Rs 1895 cr, and net profits grew by 19% to Rs 598 cr.

Its EBITDA margins also improved to 41% from 35% in the September quarter last fiscal. The growth has been a combined effect of the volume growth as well as rupee depreciation. During the quarter, its employee cost remained higher by 87% due to the consolidation of its Israeli subsidiary Taro's figures. Raw material expenses were higher by 56% to Rs 436 cr. Research and development expenses stood at Rs 93 cr for this quarter, which is about 5% of the total sales figure.

The firm's cash and investments (above Rs 4500 cr) are higher than its debt (Rs 415 cr) as of September 30, 2011. This resulted in interest income of Rs 41 cr, as compared to Rs 36 cr in the same period last year. Tax rate on a standalone basis remained at 3.9%, as compared to 15% on a consolidated basis, mainly due to higher taxes paid by its subsidiaries. Minority interest has increased from Rs 3.37 cr in the September quarter last year to Rs 109 cr this quarter due to the acquisition of Taro.

Sun Pharma’s performance remained higher in the exports business, i.e. in US and the rest of the world, which contributes about 60% revenues in the formulation business and 55% in total revenues. This geographical region has shown a YOY growth rate of 79%, while domestic formulation has grown by 15% on a YoY basis. Its bulk drugs business has grown moderately by 8% during the same period. 

The company's Israeli subsidiary, Taro, which it acquired in September 2010, has also announced robust financial results. Its net sales for the quarter stood at $138 million, showing a growth of 34% over the same period last year. Net profits grew by 218% to $59 million from the same quarter last year. Sun Pharma has proposed to acquire the remaining 25.96% shares of Taro for $24.50 per share. The proposal has been submitted to the directors of the Taro Pharma, but the decision is not yet known.

In the second quarter, the company has filed 5 ANDAs, which include 4 by Sun Pharma and 1 by Taro. It now has a pipeline of 238 USFDA-approved products and 150 products awaiting approval. It received approval for 6 products in the quarter. The company has also filed 210 DMF/CEP applications, of which 138 have been approved so far.  The total number of patent applications submitted now stands at 551, with 254 patents granted so far.

The US and emerging markets are providing a huge impetus to Indian pharma companies. Going ahead, we expect  the growth trend to continue. Sun Pharma expects negligible impact of the current financial crisis in the domestic or US market, though it may feel the heat in European markets, as the ability of the European governments may be hurt due to the current debt crisis.