Sun Pharmaceutical Industries - Q2FY21 Result Update - ICICI Direct

Q2 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 amid currency tailwinds and specialty traction. India business remained flattish (up 0.7%) YoY at Rs. 2531 crore whereas Emerging Markets business grew 10.4% YoY to Rs. 1559 crore. RoW markets business grew 16.3% YoY to Rs. 1322 crore. EBITDA margins expanded 361 bps YoY to 25.6% (I-direct estimate of 22.5%) mainly due to a better product mix (higher specialty sales) 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). PAT grew 70.4% YoY to Rs. 1813 crore (I-direct estimate: Rs. 1067 crore). Delta vis-a-vis EBITDA was due to exceptional tax gains, higher other income and lower interest expense.

Valuation & Outlook

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. While the company's US generics front is going through calibrated product rationalisation, 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 maintain BUY and arrive at our new target price of Rs. 585 based on 22x FY23E EPS of Rs. 26.6.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SunPharma_Q2FY21.pdf

Shares of SUN PHARMACEUTICAL INDUSTRIES LTD. was last trading in BSE at Rs.504.3 as compared to the previous close of Rs. 485.1. The total number of shares traded during the day was 1332584 in over 24285 trades.

The stock hit an intraday high of Rs. 518.15 and intraday low of 496. The net turnover during the day was Rs. 677966805.

Source : Equity Bulls

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