Sun Pharma dips 3% on profit booking post March quarter results

Shares of Sun Pharmaceutical Industries fell 3 per cent to Rs 676 on the BSE in intra-day trade on Friday as investors booked profit after the company reported a lower-than-expected profit after tax (PAT) in the March quarter (Q4F21) due to lower other income.

In the past three months, the stock outperformed the market by gaining nearly 20 per cent, as compared to 4.6 per cent rise in the S&P BSE Sensex, till Thursday.

Sun Pharma, on Thursday, posted a 124 per cent year-on-year (YoY) rise in net profit in the fourth quarter of financial year 2020-21 at Rs 894 crore, mainly on operational efficiencies and a low base in the corresponding quarter last year.

The company said it is evaluating developing a new pipeline of biosimilars as its R&D focus. It has also requested for an inspection of the Halol site in Gujarat. When compared to Rs 636 crore net profit in Q4 of FY19, the rise is around 40 per cent. The year 2019-20 was partially hit by the Covid-19 pandemic, thanks to a national lockdown beginning March. This impacted sales.

Sun Pharma’s consolidated sales from operations came in at Rs 8,431 crore, up 4.4 per cent YoY, and when compared to Q4 of FY19, it is up 19 per cent. Sales, however, was down 4 per cent sequentially. The company said that Q4 of FY20 sales had an exceptional item (one-time business in the US) and thus the numbers were not strictly comparable.

Sun Pharma recorded an earnings before interest, taxes, depreciation, and amortisation (Ebitda) of Rs 1,956.8 crore, up 56 per cent over Q4 last year with a resulting Ebitda margin of 23.2 per cent. The company said that higher operational efficiencies have helped the margins.

“Q4 operational performance was in line with I-direct estimates whereas PAT was below expectations due to lower other income. 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,” ICICI Securities said in a note.

That said, higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY23. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front. That said, amid the recent run-up, the stock at is factoring most of these aspects at current level, the brokerage firm said.