Earnings Outlook
US, India sales growth to bolster Sun Pharma Jul-Sep
This story was originally published at 09:17 IST on 23 October 2024
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By Apoorva Choubey
MUMBAI – Ramp-up in sales of specialty drugs in the U.S. and strong revenue growth in the domestic business are likely to help Sun Pharmaceutical Industries Ltd. register robust earnings for the September quarter. However, the pace of net profit growth is expected to slow down compared to the last two quarters.
The drugmaker's consolidated net profit for Jul-Sept is seen surging 24% on year to INR 29.5 billion, showed the average of estimates from 12 brokerage houses. The lowest projection for the company's net profit was Kotak Institutional Equities Ltd's INR 26.5 billion, while the highest was INR 32.9 billion, estimated by Systematix Shares and Stocks (India) Ltd.
The adjusted profit growth for the previous two quarters was over 25% and 30%. The company will detail its earnings for the September quarter on Monday.
Sun Pharmaceutical's consolidated net sales are likely to rise 9% on year to 132.7 billion for Jul-Sept, the estimates showed. The lowest estimate for the top-line was INR 129 billion, while the highest was INR 135.9 billion.
The strong performance of the drugmaker is likely to be led by growth in the high-margin market of the U.S. The region makes up over 30% of the company's sales and is deemed an even bigger contributor to profitability. Sales from the company's US formulations business, including those from subsidiary Taro Pharmaceutical Industries, are expected to rise around 13% to $486 million, according to three brokerage houses. Taro Pharmaceutical has been merged with Sun Pharmaceutical, the company had announced in June.
During the quarter, Sun Pharmaceutical was able to expand prescription volumes of key drugs such as Ilumya, Winlevi and Odomzo, in the U.S., even as some others like Cequa and Pentasa have seen low volumes. The growth would have been higher if not for some supply-related issues at the company's Mohali unit, said analysts.
Revenues from the company's India business are likely to have grown 11-13% on year, according to analysts. The growth will be led by higher volumes, traction in the chronic portfolio, and the impact of sales force expansion in the recent past, they said. India accounts for 33% of the company's total sales.
Nuvama Wealth Management expects the drugmaker's global specialty business to witness revenue growth of 15% at $277 million. Brokerage Motilal Oswal Financial Services expects a steady increase in the prescription run-rate of specialty products, driving 17% growth in specialty sales at $280 million for the September quarter.
The strong sales growth from the U.S. and India will also prop up the drugmaker's earnings before interest, tax, depreciation and amortisation margin, despite higher research and development spending, analysts said. The operating margin for Jul-Sept is seen expanding 100-402 basis points from 26.4% a year ago. The research and development spend is seen at 6.9-7.6% of sales, but some other expenses such input costs may be lower, brokerage houses said.
On a quarter-on-quarter basis, the company's net profit is seen 4% higher, while net sales may rise 5%. Investors will monitor the company's comments on the outlook for branded generics, the launch of Deuruxolitinib in the U.S. market, revision in R&D spend targets, drug pipeline, and resolution of issues at the Mohali and Halol units.
On Tuesday, shares of Sun Pharma closed 0.5% lower at 1,887.55 rupees on the National Stock Exchange.
Following are the Jul-Sept earnings estimates for Sun Pharmaceutical based on reports from 12 brokerages:
| Brokerage firm | Net sales (INR million) | Net profit (INR million) |
EBITDA (INR million) |
| Elara Securities (India) Pvt Ltd | 132,204.00 | 27,303.00 | 36,289.00 |
| HDFC Securities Ltd | 132,666.00 | 28,505.00 | 36,483.00 |
| Kotak Institutional Equities | 131,913.00 | 26,487.00 | 36,098.00 |
| KR Choksey Research | 134,270.00 | 31,443.00 | 38,931.00 |
| Motilal Oswal Financial Services Ltd | 129,520.00 | 28,692.00 | 34,970.00 |
| Nomura Equity Research | 132,909.00 | 32,306.00 | 40,931.00 |
| Nuvama Wealth Management Ltd | 135,852.00 | 29,613.00 | 38,061.00 |
| PhillipCapital (India) Pvt Ltd | 135,450.00 | 28,587.00 | 34,675.00 |
| Prabhudas Lilladher Pvt Ltd | 133,585.00 | 29,875.00 | 37,936.00 |
| Sharekhan Ltd | 130,320.00 | 28,870.00 | |
| Systematix Shares and Stocks (India) Ltd | 134,108.00 | 32,883.00 | 41,589.00 |
| YES Securities (India) Ltd | 129,007.00 | 29,020.00 | 36,566.00 |
| Average | 132,650.33 | 29,465.33 | 37,502.64 |
End
US$1 = INR 84.07
Edited by Avishek Dutta
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