Sun Pharma’s Profit Jumps 117% In The Second Quarter
Sun Pharma’s second quarter earnings beat analyst estimates
Sun Pharmaceutical Industries Ltd. beat analyst estimates in the July-September quarter for the current financial year.
Net profit surged 117 percent to Rs 2,235 crore in the second quarter from Rs 1,029 crore in the same period last year, according to the company’s filing on the Bombay Stock Exchange. The consensus estimate of analysts tracked by Bloomberg stood at Rs 1,620 crore. Higher other operating income and lower finance cost, aided the profit after tax (PAT) figure to come in at Rs 1,624 crore, 37.6 percent higher than estimates.
Net sales increased 13.2 percent to Rs 7,764 crore, v/s Rs 6,858 crore during the corresponding quarter last year. Total income came in at Rs 8,265 crore as against Rs 6,873 crore in the same period last year. Analysts had estimated this figure to come in at Rs 7,840 crore.
Strong Operational Performance -
Synergies Start Yielding Results
Muted growth in overhead costs and lower other expenses translated to a 43.5 percent jump in the earnings before interest, tax, depreciation and amortisation to come in at Rs 2,667 crore v/s Rs 1,858 crore in the same period last year, reflecting the benefits of acquiring Ranbaxy Laboratories Ltd.
EBITDA margin expanded by 702 basis points, to come in at 34.3 percent from 27.1 percent in the second quarter last year, as per BloombergQuint’s calculation. Margins also expanded 80 basis points on a sequential basis despite the expiry of the 180-day exclusivity for Gleevec and one-off sales of $35 million in the June ended quarter.
Other operating income for the quarter at Rs 501 crores includes a $ 45 million milestone payment from Almirall S.A (Spain) as part of the licensing agreement for development and commercialisation of Tildrakizumab, used to treat psoriasis in Europe.
The synergies from the Ranbaxy acquisition are gaining momentum and we are on track to achieve the targeted benefits. These synergies will continue to help in funding our emerging specialty businesses. Post the close of the quarter, we further strengthened our branded ophthalmic pipeline through the acquisition of Ocular Technologies. We were also very happy to announce the detailed results for Tildrakizumab Phase-3 trials which validate the potential of this product for psoriasis treatment.Dilip Shanghvi, Managing Director, Sun Pharma in the media statement
Geographical Performance
Sales in India grew by 11 percent to come in at Rs.2,009 crores, over the last year, broadly in-line with analyst expectations. A low base also aided the bounce back in domestic market growth.
Finished dosage sales in the U.S. grew 9 percent to come in at $555 million. On a sequential basis, the fall was contained at 8.8 percent despite the end of 180-day exclusivity for anti-cancer drug Imatinib which lasted till July-2016. This probably means the company has faced lower price erosion in the drug with the entry of other players.
Sales in emerging markets rose 22 percent over last year to $170 million while rest of world sales grew 3 percent to $79 million.
Consolidated Research and Development (R&D) expenses for the quarter stood at Rs. 570 crores, or 7.3 percent of sales compared to Rs 531 crores or 6.6 percent of sales for the previous quarter on account of funding the clinical development of the specialty pipeline.
The company’s board has also approved a proposal to amalgamate four of its units with itself. The four units are:
- Sun Pharma Medisales Pvt. Ltd.
- Ranbaxy Drugs Ltd.
- Gufic Pharma Ltd.
- Vidyut Investments Ltd.
The net worth of all the four companies as of September 30, 2016, stood at Rs 194 crore.
The amalgamation will result in more productive and optimum use of various resources, fuelling the growth of the business as well as reduce the multiplicity of legal and regulatory compliance, the company said it its media release.
Analyst’s Take
Sun Pharma’s Q2FY17 net profit is an 18 percent beat on second quarter estimates. Revenue adjusted for milestone receipt of $45 million related to Tildrakizumab is in-line with our estimates. While U.S. sales of $555 million (versus our estimate of $580 million) was below our estimates largely due to sales miss in Taro Pharma, domestic formulations (up 11%) was in line of expectations and the emerging market sales performance was robust with 25 percent growth. There was a 450 basis point positive surprise in the margins (up 875 bps year-on-year) at 36 percent (versus estimate of 31.5 percent) even after adjusting the licensing income, resulting in 13 percent beat in EBITDA at Rs 2,868 crore (versus estimate of Rs 2,558 crore).Surya Patra, Analyst, PhillipCapital
Shares of Sun Pharmaceuticals Ltd., ended the day 1.37 percent higher at Rs 669.80 on the Bombay Stock Exchange.