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Informist, Thursday, Jan. 23, 2025

 

By Narayana Krishna

 

HYDERABAD - Strong growth in the specialty products business in the US and steady domestic sales are likely to enable Sun Pharmaceutical Industries Ltd. to post healthy year-on-year earnings for the December quarter, according to analysts.

 

Sun Pharma is projected to report a 15% year-on-year rise in its Oct-Dec consolidated net profit to INR 29 billion, with revenue for the quarter expected to increase 9% year-on-year to INR 134.4 billion, based on the average estimates of 12 brokerages.

 

Sequentially, the company's net profit is estimated to decline by 5%, while revenue is expected to rise by 1%. Sequential fall in net profit is mainly on account lower contribution from cancer drug generic Revlimid, analysts said.

 

Among the projections, Nirmal Bang Equities Pvt. Ltd. has the lowest net profit estimate at INR 26.2 billion, while Systematix Shares and Stocks (India) Ltd. forecasts the highest at INR 31.9 billion. For revenues, the lowest estimate is INR 132.2 billion by Nuvama Wealth Management Ltd., with the highest at INR 138.3 billion from K.R. Choksey Research.

 

Sun Pharma is scheduled to announce its Oct-Dec earnings on Jan 31.

 

SPECIALTY PLAY

Over the past few years, Sun Pharma's dependency on generics has reduced and speciality products segment is contributing more to margins and overall profitability, besides continued strong growth in domestic pharma market.

 

Most analysts believe Sun Pharma's December quarter show will mainly be led by specialty products segment, while the generics business is likely to see moderate growth in the US.

 

"We expect revenue to increase 11.7% year-on-year and 4% quarter-on-quarter, where the US specialty business will continue to be a significant growth driver. This is supported by the strong performance of key specialty products and substantial growth potential in Lenalidomide (Revlimid) sales in the US, along with the company solidifying its market leadership in India," K.R. Choksey Research said in its pre-earnings note.

 

According to Emkay Global Financial Services Ltd., Sun Pharma is expected to report $512 mln of sales in the US for December quarter, while Revlimid contribution is likely to go down to $30 mln from $65 mln in September quarter, impacting the sequential performance.

 

Kotak Institutional Equities projected US sales for the quarter at $534 mln, while specialty share in it would be $295 mln. Sun Pharma has key products like Ilumya, Cequa, Winlevi and Odomzo in its specialty products portfolio. Ilumya is used to treat moderate-to-severe plaque psoriasis, while Cequa addresses dry eye disease. Winlevi is a topical treatment for acne, and Odomzo is prescribed for locally advanced basal cell carcinoma that cannot be treated with surgery or radiation. Sun Pharma has significant market share in each of these products.

 

Emkay Global expects Sun Pharma to deliver healthy double-digit growth in domestic sales for a sixth consecutive quarter with an 11.8% on-year rise in sales.

 

MARGIN PRESSURE

Most analysts project Sun Pharma's December quarter earnings before interest, tax, depreciation and amortisation, or EBITDA, margins are likely to be impacted by higher spending on research and development activity.

 

According to an average of estimates of 11 brokerages EBITDA in December quarter is pegged at INR 37.5 billion with the lowest estimate being INR 35.1 billion and the highest being INR 41.3 billion.
Analysts' estimates for Sun Pharma Oct-Dec EBITDA margin were in the range of 26.6-29.5%.

 

While Nuvama Wealth expects the company's R&D spend to be slightly higher at 8% of the sales for the quarter, Kotak Institutional expects it at 7.5% of the sales, impacting the margins. Kotak Institutional said EBITDA margins will decline by 210 basis points sequentially to 26.6%.

 

Market participants are keenly watching for the company commentary on status of regulatory issues at Mohali and Halol facilities. Clarity on new launches in the US and outlook on branded generics are another key monitarables.

 

Following are the Oct-Dec earnings estimates for Sun Pharmaceutical Industries Ltd. based on reports from 12 brokerage firms in the descending order by the estimate of net profit:

 

Brokerage name	Net Sales	Net Profit	EBITDA
	-------(In INR million)-------
Systematix Shares and Stocks (India) Ltd	1,38,193.00	31,936.00	41,317.00
KR Choksey Research	1,38,289.00	31,044.00	40,024.00
JM Financial Institutional Securities Pvt Ltd	1,33,839.00	30,497.00	39,508.00
Sharekhan Ltd	1,34,000.00	29,900.00	----
Motilal Oswal Financial Services Ltd	1,33,819.00	29,639.00	35,997.00
Emkay Global Financial Services Ltd	1,33,904.00	29,542.00	37,929.00
Prabhudas Lilladher Pvt Ltd	1,32,703.00	28,821.00	37,638.00
PhillipCapital (India) Pvt Ltd	1,34,804.00	28,736.00	36,532.00
HDFC Securities Ltd	1,32,439.00	27,980.00	36,156.00
Kotak Institutional Equities	1,35,754.00	27,524.00	36,151.00
Nuvama Wealth Management Ltd	1,32,189.00	26,353.00	35,842.00
Nirmal Bang Equities Pvt Ltd	1,32,295.00	26,165.00	35,058.00
Average	1,34,352.33	29,011.42	37,468.36

 

 

At 1210 IST, shares of Sun Pharmaceutical were trading at INR 1,837 on the National Stock Exchange, up 2.12% from the previous close.  End

 

US$1 = INR 86.46

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

 

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