Sun Pharma slips 4% on posting Rs 2,277 crores loss in Q4

Shares of Sun Pharmaceutical Industries slipped 4 per cent to Rs 851.50 on the BSE in Tuesday’s trade, falling 6 per cent since yesterday when the company posted a net loss of Rs 2,277 crore for the fourth quarter of the financial year 2021-22 (Q4FY22).

The loss came on account of settlement charges of pending litigations in the US, and restructuring operations in some countries. Adjusted profit grew 18 per cent year on year (YoY) to Rs 1,582 crore.

Consolidated sales from operations rose 11 per cent YoY at Rs 9,386 crore over Q4 last year. Earnings before interest depreciation tax and amortization (EBITDA) was up 14.6 per cent YoY at Rs 2,280 crore. EBITDA margins improved 74 bps YoY despite lower margins from Taro in Q4, and were at 24.8 per cent on back of marginal dip in gross margins being offset by lower other expenditure.

Sun Pharma’s Q4FY22 operational performance was in line with our estimates. In India, Sun Pharma launched 11 new products in Q4 while also increasing market share. The company’s US generics front is going through calibrated product rationalisation, the specialty segment looks promising due to robust product pipeline, steady progress, ICICI Securities said in a note.

In Q4FY22, specialty sales grew 30 per cent YoY to US$185 million while global Ilumya sales recorded 81 per cent growth to reach US$315 million in FY22. 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 branded franchise is likely to change the product mix towards more remunerative businesses. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front, the brokerage firm said.

Sun Pharma delivered a lower-than-expected Q4FY22 due to moderation in the RoW/EMs/API segment and higher OPEX. The specialty portfolio continues to progress well, with its contribution to sales rising to 13 per cent in FY22 from 7 per cent in FY18, said brokerage Motilal Oswal Financial Services.

“We remain positive on Sun Pharma on the back of a strong outperformance in the branded Generics segments of DF/RoW/EMs, scale-up of the specialty portfolio, and niche launches in the US generics segment,” it said. It maintained its Buy rating on the stock with a 12 month-target price of Rs 1,040 per share.

The stock has underperformed the market, declining 6 per cent this week as compared to a 3.3 per cent rise in the S&P BSE Sensex. However, in the past six months, it has rallied 13 per cent as against a 2 per cent decline in the benchmark index. Further, in the last one year, the stock has surged 28 per cent as compared to a 7.5 per cent rise in the Sensex.