 "Sun Pharma")
Shares of Sun Pharmaceutical Industries slipped 5 per cent to Rs 1,467 on the BSE in Thursday’s intra-day trade. In otherwise strong market, the stock prices cracked post March quarter (Q4FY24) results.
The company’s management guided for high single digit revenue growth in fiscal 2024-25 (FY25) but refrained from giving margin guidance.
Dilip Shanghvi, Chairman and Managing Director of the company said that FY25 is going to be an “investment phase” for several businesses, including product launches in the US and the ramp-up of the global specialty business.
The stock of pharmaceutical company hit over three month low and trading at its lowest level since February 6, 2024. At 12:35 pm; Sun Pharma was trading 3 per cent lower at Rs 1,490.85, as compared to 0.85 per cent rally in the S&P BSE Sensex. With today’s decline, the stock corrected 10 per cent from its 52-week high level of Rs 1,638.70 touched on April 5, 2024.
India’s largest pharmaceutical company, Sun Pharma, posted a consolidated net profit of Rs 2,654.6 crore for Q4FY24, up 33.7 per cent from Rs 1,984.5 crore in Q4FY23. The company’s gross sales grew by 10 per cent year-on-year (YoY) to Rs 11,813 crore.
Earnings before interest, tax, depreciation, and amortisation (Ebitda), including other operating revenues, was Rs 3,035.2 crore, up 8.3 per cent, resulting in an Ebitda margin for Q4FY24 of 25.3 per cent, compared to 25.6 per cent in Q4FY23.
Sun Pharma’s performance continued to thrive on remunerative businesses of US (along with Global Specialty) and domestic formulations. Overall better product mix with higher specialty business aided growth during the quarter, ICICI Securities said.
The India business continued to grow with a branded portfolio, leading to an increase in its market share. It remains strategically focused on specialty business which is evident from a significant increase in R&D allocation towards specialty from 24 per cent to 42 per cent in Q4.
Overall R&D spend will also be higher at 8-10 per cent going ahead. However, management’s conservative guidance of high single digit revenue growth for FY25 together with R&D jack up does indicate that current lot of specialty products are approaching peak and the company intend to invest in a new lot, the brokerage firm said. ICICI Securities assigned a 'HOLD' rating on the stock with target price (TP) of Rs 1,530 and asked investors to monitor progress on the specialty launches and R&D spend.
The management guided for high single digit revenue growth in FY25 factoring in the impact of US site compliance issues. Usually, the management guidance is prudent and meets or exceeds the same. The management also guided for more investments across businesses particularly product launch costs in the US (for Deuruxolitinib). The R&D guidance was raised to 8-10 per cent (vs. 6-7 per cent in FY24). However, the management remains elusive on margins, said analysts at JM Financial Institutional Securities.
“Sun’s annual operating cash flows of over $1 billion and potential access to Taro’s rich cash reserves creates room for bolder and bigger bets in the specialty segment, in our view. The key focus area remains derma and eye-care in the US. Given the robust long-term specialty outlook, domestic leadership, strong cash position and risk-appetite for large M&As, we maintain BUY with a Mar’25 TP of Rs 1,655,” the brokerage firm said in result update.
