Sun Pharma Beats Market Expectations

Pharma major Sun Pharma has beat the market expectations by reporting a handsome 32% growth in its net profit to Rs 881 crore. The Net Sales too grew by 33% to Rs 2852 crore. The market was expecting a net profit on revenues at Rs 838 crore of Rs 2,645 crore for the quarter.

The strong numbers have come over the consolidation of Sun Pharma’s newly acquired US subsidiary Dusa Pharma. Its Israeli subsidiary Taro Pharma has shown a superb performance during this quarter wherein its net sales grew by 25% to USD 185.7 million (Rs 1028 crore). Net profit was up 42% to USD 88.8 million (Rs 488 crore).

The company, in the September quarter, has completed the acquisition of another US-based company URL Pharma. This acquisition has added a total of 107 products in the portfolio of Sun Pharma. The URL acquisition, however, did not include its main revenue generating drug Colcrys and hence the success of the company depends on how fast it monetises the pipeline of URL Pharma.

During the quarter, branded generic sales in India were up by 13% to Rs 788 crore. The company’s US-finished dosages grew by 32% to USD 276 million (Rs 1518 crore). International formulations also grew by 31% to USD 73 million (401 crore). For the first nine months, Sun Pharma has clocked a growth of 44% in revenues. Its US revenue has grown by 53% in the first nine months, which should be considered as a remarkable growth. Indian branded generics, on the other hand, have grown by just 7%, which is a poor performance.

On the EBITDA front, the company’s margins have fallen by 44 basis points on a YoY basis. This could be attributed to a rise in the costs due to the consolidation of Dusa Pharma. The total expenses were up by nearly 35% to Rs 1591 crore. Yet, on a sequential basis, the margins have improved by 47 basis points.

On the products front, the company launched 7 products in India during the quarter, taking the total to 22 for the first nine months. It also filed 8 new ANDAs. Cumulatively, Sun Pharma has 403 ANDAs filed with USFDA, of which 261 are approved and 142 are awaiting approvals.

On the valuation front, the stock is trading at a Price to Earnings multiple of 27.5x of its TTM EPS of Rs 27.2. Sun Pharma being the largest market cap company in the pharma sector, it commands a premium over its peers. We believe that there is ample scope for price appreciation in the scrip and hence, one should buy the stock with a long-term perspective.