Strong Q2 Sun Pharma numbers boosted by Speciality, India
Despite significantly muted Taro (major US based subsidiary in US generics) numbers, Sun Pharma reported commendable numbers mainly driven by US focused speciality and decent domestic and ROW market growth.
Revenues grew 13.8% YoY to Rs 10952.3 crore, driven by market share gain in India, sustained ramp-up of global specialty business and growth in Emerging Markets. All business segments recorded good growth while specialty business grew 27.5% YoY to US$ 200 million driven by brands such as Ilumya, Cequa and Winlevi. Gross margins increased ~147 bps over the previous year to 75.3%. The expansion was mainly due to the change in product mix, higher contribution from specialty products. EBITDA margins declined 33 bps YoY to 27%. The decline was due to higher employee and other expenses. Adjusted PAT increased 10.5% YoY to Rs 2262 crore.
Sun Pharma delivered a strong performance in terms of revenues and margins. We believe higher contribution from specialty to overall revenues (from 11% in FY21 to ~15% by FY24E) and sustained momentum in India branded formulations to improve product mix and margins profile for Sun Pharma. In the US, Sun has diversified into specialty products like Ilumya, Levulan, BromSite, Cequa, Xelpros, Odomzo, Yonsa, Winlevi, we expect speciality to continue to perform well. Launch momentum in India (32 launches in Q2), pick-up in demand for chronic and sub-chronic segment backed by high PCPM and field expansion by 10% in FY23 are expected to sustain growth for Sun Pharma. We value the company at Rs 1225 i.e. 30x FY24E EPS of Rs 40.9.
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