SUN PHARMA REPORTS IN LINE Q4, SPECIALTY MOMENTUM CONTINUES

News: Revenues grew 11% YoY to | 9447 crore (I-direct estimate: | 9459 crore). Indian formulations grew 16% YoY to | 3097 crore (I-direct estimate: | 2991 crore). US formulations grew to | 2925 crore (I-direct estimate: | 2953 crore), up 8% YoY. Emerging Markets business grew 10% YoY to | 1548 crore (I-direct estimate: | 1682 crore). RoW Markets business grew 10% YoY to | 1341 crore (I-direct estimate: | 1251 crore). API segment was flat YoY at | 478 crore (I-direct estimate: | 535 crore). EBITDA margins improved 74 bps YoY despite lower margins from Taro in Q4, and were at 24.8% (I-direct estimates of 25.5%) on back of marginal dip in gross margins being offset by lower other expenditure. Subsequently, EBITDA grew 14% YoY to | 2340 crore (I-direct estimate: | 2409 crore). Adjusted profit grew 18% YoY to | 1582 crore (I-direct estimate: | 1953 crore). [Note: Profit is adjusted for one-off exceptional expenditure of ~ | 3935.7 crore and exceptional tax gain of ~ | 76.4 crore in Q4FY22]. The Board of Directors recommended final dividend of | 3 per share, taking the total dividend to | 10 per share in FY22 (including interim dividend of | 7 per share)

Views: Sun Pharma’s Q4FY22 operational performance was in line with I-direct 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. In Q4FY22, Specialty sales grew 30% YoY to US$185 million while Global Ilumya sales recorded 81% 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

Impact: Positive