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Sun Pharma numbers buoyed by domestic formulations, specialty

ICICI Securities 03 Feb 2022

What’s Buzzing:

Sun Pharma's operational performance was in line with I-direct estimates amid sustained momentum and good growth across businesses.

Context:

 Revenues in Q3 grew 11.6% YoY to Rs 9863.1 crore (I-direct estimate: Rs 9656.9 crore). Indian formulations grew 15.1% YoY to Rs 3167.6 crore (I-direct estimate: Rs 3083.1 crore). US formulations grew to Rs 2971.8 crore (I-direct estimate: Rs 2903.5 crore), up 7.6% YoY. Emerging Markets business grew 18.8% YoY to Rs 1789.9 crore (I-direct estimate: Rs 1687.9 crore). RoW markets business grew 4.2% YoY to Rs 1353.2 crore (I-direct estimate: Rs 1403.4 crore). API segment grew 9.2% YoY to Rs 531.8 crore (I-direct estimate: Rs 509.5 crore). EBITDA margins declined just 80 bps and stood at 26.4% (I-direct estimates of 26.5%) on the back of marginal dip in gross margins and higher other expenditure. Subsequently, EBITDA grew 8.3% YoY to Rs 2606.3 crore (I-direct estimate: Rs 2559.1 crore).

Our perspective:

 India business continues to grow faster than market, leading to increase in 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 and for 9MFY22 has already crossed the previous full-year revenues. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front.

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