Sun Pharma Q4: Loss of Rs 2,277 Crore due to One Time Exceptional Items
Company reported a surprise loss: Sun Pharma has reported a surprise net loss of Rs 2,277.38 crore for the quarter ended March hit by a one-time charge. In the year-ago period, the company reported a profit of Rs 848 crore. In the December quarter, the company reported a profit of Rs 2,058.8 crore. Analysts had estimated a profit of about Rs 1,707 crore.
Exceptional items (settlements, and provisions related to Taro Pharmaceuticals, and Ranbaxy) for the quarter stood at Rs 3,935.75 crore against Rs 672.81 crore last year.
Revenue rises: Revenue rose 11% YoY to Rs 9,386.08 crore in the quarter ended March below the analysts’ forecast of Rs 9,576 crore. Sequentially, the revenue declined from Rs 9,863.06 crore.
Margins decline: The company's EBITDA for the Jan-Mar quarter came in at Rs 2,279.7 crore, up by 14.6% compared to the year-ago period. Analysts’ had projected the EBITDA levels to Rs 2,462.3 crore. Margins for the same quarter declined to 24.3% from 26.5% in the last quarter.
Dividend: The company declared a final dividend of Rs 3 per share for FY22 subject to the approval of the shareholders at the ensuing Annual General Meeting and which shall be paid within the timelines as required under the Companies Act, 2013.
Spend on R&D: Consolidated R&D investment for Q4FY22 was Rs 543.30 crore as compared to Rs 557.10 crore for Q4 last year. R&D efforts span both specialty and generic businesses and the company continues to invest in building the pipeline for various markets including the US, Emerging Markets, RoW Markets, and India. The specialty R&D pipeline includes 4 molecules undergoing clinical trials.
Sales across regions: Sales in the US which accounted for 31% of the total sales, rose 5% on year to $389 million. The sales in India were up 16% at Rs 3,095.60 crore, while sales in emerging markets grew 7% to $206 million for Q4FY22.
Taro Performance: Taro posted Q4FY22 sales of $143 million, down 3% YoY, and a net profit of about $27.4 million, lower by 11.6% over an adjusted net profit of Q4 last year.
Management Commentary: "Our India business continues to grow faster than the market, leading to an increase in market share. We continue to focus on expanding our global specialty business, growing all our businesses, and improving operational efficiencies”, Dilip Shanghvi, Managing Director.
The share was trading at Rs 836, down 2.9% on Wednesday afternoon.
Brokerage Radar
Motilal Oswal: The brokerage firm has given a BUY call for Sun Pharma with a target price of Rs 1040. Sun pharma delivered a lower-than-expected 4QFY22 due to moderation in the RoW/EMs/API segment and higher OPEX. However, the company’s Specialty portfolio continues to progress well, with its contribution to sales rising to 13% in FY22 from 7% in FY18.
JM Financials: The brokerage firm has given a BUY call for Sun Pharma. Sun’s Q4FY22 was driven by growing domestic and global specialty portfolio sales although the bottomline was impacted by one-offs. They believe that Sun’s learning curve has been steep in the Big Pharma-dominated specialty market and has successfully carved a niche for itself. The firm values Sun Pharma at 25x FY24 EPS of Rs 43.6 to derive a target price of Rs 1,090 per share.
Kotak Securities: Analysts have given ADD call for Sun Pharma with a target price of Rs 985. They have cut FY2023/24E EPS by 4%/1% due to field force expansion, higher R&D, and lower Alchemee profitability. FV lowered to Rs 985 (at 25X FY2024 PE) from Rs 1,000. Continued execution in specialty provides further re-rerating potential.