Sun Pharma's Q2 net profit rises 70% on one-time tax credit

Revenues remain flat, sequential improvement in India and US revenues

India's largest pharma company Mumbai-headquartered Sun Pharmaceutical Industries posted a massive 70 per cent year-on-year rise in consolidated net profit thanks to an exceptional tax credit of Rs 288 crore. On a standalone basis too the net profit grew by 36 per cent even as the revenue growth remained muted. 

Sun Pharma stock ended the day's trade at Rs 485 apiece on the BSE, up 3.4 percent as the results came in ahead of analyst expectations.  

The revenues grew by 6.4 percent on a consolidated basis as the rest of the world (RoW) and emerging market sales were up. Sun Pharma's two major markets - India and US - posted flat growth in revenues. India and US both account for 30 per cent of its consolidated sales. 

The second quarter, however, saw some signs of revival. 

 

While the India sales was up only one per cent on YoY basis, it clocked a six per cent sequential growth. Similarly, the US markets posted a flat revenue growth YoY to $335 million, but was up by 19 per cent sequentially thanks to sales on two specialty products Ilumya and Cequa. 

Sun Pharma MD Dilip Shanghvi said that the Q2 performance reflected the gradual recovery in all its businesses compared to the previous quarter despite market conditions that have not fully 'normalised'. "Sales of our specialty products have improved sequentially with Ilumya and Cequa reaching pre-Covid levels. We continue to focus on growing our topline, gaining market share, cost control and business continuity," he added. 

Taro posted an 11 per cent decline in sales on a YoY basis to $143 million while its net profit was down by 19.7 percent. Sequentially, however, revenues were up 21 per cent and net profit by a massive 55 per cent in Q2FY21

The consolidated earnings before income tax, depreciation and amortisation (EBITDA) came in  at Rs 2,099 crore, up by 30 per cent over Q2 last year, with resulting EBITDA margin of 24.8 per cent. The company noted, "Sequentially, EBITDA was up 22 per cent with EBITDA margin improvement of 170 bps and was driven by gradual recovery in overall business coupled with control on expenses, despite higher R&D spending and forex losses." 

 

Consolidated profit after tax came in at Rs 1,812 crore, up 70 per cent. The tax gain for the quarter ended September 2020 was on account of creation of deferred tax asset amounting to Rs 288.28 crore arising out of subsequent measurement attributable to restructuring of an acquired entity.The company had a forex loss of Rs 116.4 crore during the quarter, against forex gain of Rs 8.5 crore in Q2FY20. 

Investments in R&D were higher during the quarter, at Rs 613 crore or 7.2 per cent of sales as compared to Rs 488 crore or 6.1 per cent of sales in Q2FY20

On a standalone basis, Sun Pharma posted a marginal decline in YoY revenue to Rs 3207 crore from Rs 3215 crore in the same period last year. The profit after tax came in at Rs 724 crore thanks to a tax credit of Rs 23 crore. 

Indian drug regulator denies emergency use authorisation for herbal drug

The Indian drug regulator has declined an application seeking emergency use authorisation (EUA) for AQCH, a phytopharmaceutical or herbal drug that Sun Pharma is testing for treatment of Covid19 based on the results of phase II clinical trials. Sun Pharma had submitted an application for EUA of AQCH to  the Central Drugs Standard Control Organisation (CDSCO). The COVID-19 subject expert committee (SEC) deliberated on Sun Pharma’s application and declined EUA for AQCH. The company said, "Sun Pharma believes AQCH is effective and well tolerated in moderate Covid-19 patients, based on clinical study data, and has the potential to reduce the overall burden on the healthcare system. The company is in the process of providing additional analysis and clarifications to the regulator based on the queries raised during its presentation to the SEC." 

Sun Pharma has been conducting Phase II clinical trial on AQCH since May 2020.