Sun Pharmaceuticals - Q2FY21 First Cut - ICICI Securities

(CMP: Rs. 485; MCap: Rs. 116389 crore)

Sun Pharma's Q2FY21 results were above I-direct estimates on all fronts mainly on account of better than expected operational performance, tax gain on creation of deferred tax assets, higher other income and lower interest expense.

Q2FY21 Earnings Summary

- Revenues grew 5.3% YoY to Rs. 8553 crore (I-direct estimate: Rs. 8069 crore). US formulations grew 4.3% YoY to Rs. 2492 crore (I-direct estimate: Rs. 2307 crore) amid currency tailwinds. India business remained flattish (up 0.7%) YoY at Rs. 2531 crore (I-direct estimate: Rs. 2515 crore) whereas Emerging Markets business grew 10.4% YoY to Rs. 1559 crore (I-direct estimate: Rs. 1412 crore). RoW Markets business also grew 16.3% YoY to Rs. 1322 crore (I-direct estimate: Rs. 1137 crore). API segment posted 11.9% YoY growth to Rs. 555 crore (I-direct estimate: Rs. 578 crore)

- EBITDA margins expanded 361 bps YoY to 25.6% (I-direct estimates of 22.5%) mainly due to better gross margins and lower other expenditure Delta vis-à-vis I-direct estimates was mainly due to lower staff costs and better gross margins. EBITDA grew 22.5% YoY to Rs. 2193 crore (I-direct estimate: Rs. 1815 crore)

- Net profit grew 70.4% YoY to Rs. 1813 crore (I-direct estimate: Rs. 1067 crore). Delta vis-a-vis EBITDA was due to exceptional tax gain on creation of deferred tax assets, higher other income and lower interest expense

While the company's US generics front is going through calibrated product rationalisation, the specialty segment looks promising due to robust product pipeline, steady progress. This metamorphic shift from generics to specialty, however, is likely to weigh on US growth in the near term. That said, higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY22. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front.

We will be coming out with a detailed report soon.

Shares of SUN PHARMACEUTICAL INDUSTRIES LTD. was last trading in BSE at Rs.485.1 as compared to the previous close of Rs. 469.2. The total number of shares traded during the day was 463378 in over 10254 trades.

The stock hit an intraday high of Rs. 490.45 and intraday low of 466.05. The net turnover during the day was Rs. 222450497.

Source : Equity Bulls

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