Q1 Results: Sun Pharma’s Profit Beats Highest Estimate Even As Margin Contracts
Sun Pharma’s net profit rose 31.2 percent year-on-year to Rs 1,388 crore in the April-June period.
Sun Pharmaceutical Industries Ltd.’s net profit beat the highest analyst estimate in the quarter ended June even as its margin contracted.
Net profit of India’s largest drugmaker rose 31.2 percent year-on-year to Rs 1,388 crore in the April-June period, according to an exchange filing. That compares with the Rs 1,077-crore consensus estimate of analysts tracked by Bloomberg. Higher profit came on the back of a forex gain of Rs 67 crore compared to a loss a year ago. Restructuring of domestic business had hurt the company’s bottom line in the quarter ended March.
Sun Pharma’s revenue increased 15.9 percent over the last year to Rs 8,374 crore in the April-June period—in line with the Rs 8,120-crore estimate.
“The better-than-estimated result is primarily due to the new business opportunities they had spoken about in the fourth quarter. So, I think there is some addition to the run rate they had in the U.S. in quarter four,” said Kunal Dhamesha, pharma research analyst at SBICAP Securities. Also, the normalisation of the one-time hit seen by business restructuring also supported profit, he told BloombergQuint.
This comes at a time the nation’s pharmaceutical market grew at its slowest pace in five years in the quarter ended June. Also, Indian drugmakers, including Sun Pharma— who predominantly sell generics in the U.S.—continue to face intense competition and pricing pressure in one of their biggest contributors to sales. That forced companies to cut prices and settle for lower margin.
Morgan Stanley, however, upgraded Sun Pharma’s rating to ‘Overweight’ from ‘Underweight’ and hiked target price as it expects fiscal 2019-20 to be a “transitional year” for the company, followed by a positive operating leverage.
Sun Pharma’s earnings before interest, tax, depreciation and amortisation rose 13.7 percent to Rs 1,696 crore. Its operating margin narrowed 50 basis points to 23 percent.
Shares of the drugmaker rose as much as 5.3 percent to Rs 444.5 apiece, compared with a 1.76 percent drop in the benchmark Sensex. The stock has risen 0.5 percent so far this year compared with a more than 10 percent fall in the benchmark NSE Nifty Pharma Index. Besides Divi’s Laboratories Ltd., Sun Pharma is the only stock that has gained in the index.
