Sun Pharmaceutical Industries Ltd. signage is displayed outside the company’s corporate office in the Andheri suburb of Mumbai, India. (Photographer: Amit Madheshiya/Bloomberg)

Q3 Results: Sun Pharma’s Profit Beats Estimates, Margin Expands On Forex Gains

Sun Pharmaceutical Industries Ltd.’s quarterly profit beat estimates on a higher margin, providing relief to India’s largest drugmaker as it grapples with corporate governance concerns.

Net profit rose 286 percent year-on-year to Rs 1,242 crore, according to its regulatory filing. That compares with the Rs 980-crore consensus estimate of analysts tracked by Bloomberg.

The bottom line in the corresponding quarter last year was adversely impacted by a one-time adjustment of Rs 513 crore on re-measurement of deferred tax assets due to the Tax Cut and Jobs Act enacted in the U.S. in October 2017. Adjusted for that, Sun Pharma’s net profit grew 49 percent year-on-year.

Revenue rose 16.3 percent to Rs 7,740 crore for the three months ended December, compared to the Rs 7,415-crore estimate.

“Our focus on execution is reflected in the Q3 performance,” Managing Director Dilip Shanghvi said in a statement. “We remain committed towards executing our global specialty strategy, strengthening our core operations and enhancing our overall efficiencies.”

Operating income or the earnings before interest, tax, depreciation and amortisation rose 48.1 percent to Rs 2,153 crore, surpassing the estimate of Rs 1,616 crore. The operating margin expanded 600 basis points on a yearly basis to 27.8 percent. The margin improvement was partly driven by forex gains.

"India and non-Taro U.S. sales were weak in the third quarter for Sun Pharma. EBITDA beat was led mainly led by lower R&D costs and forex gains,” said Param Desai and analyst with Elara Capital in a post-earnings report.

Key Highlights (YoY)

  • India sales rose 7 percent to Rs 2,235 crore.
  • U.S. finished dosage sales increased 10 percent to $362 million.
  • Emerging markets sales stood at $203 million, up 7 percent.
  • Rest of the world sales rose 4 percent to $125 million.

Shares of Sun Pharma ended 1.9 percent higher ahead of the earnings announcement. The stock had fallen to its lowest in almost six years in mid-January after a media report that a new whistleblower complaint alleging corporate governance lapses had been sent to the market regulator. The stock has since erased most of its losses, and is trading 3 percent higher so far in February.

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