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Sun Pharma Q1FY23 Review: Branded, specialty franchise driving trajectory

ICICIdirect Research 01 Aug 2022 DISCLAIMER

What's Buzzing:

Sun Pharma's Q1FY23 revenues were better than our estimates amid strong momentum across business verticals while margins also beat estimates.

Context:

Revenues grew 11% YoY to Rs 10762 crore (excluding Covid products sales for Q1 last year, overall sales up 14%). Indian formulations grew 2% YoY to Rs 3387 crore, while excluding Covid sales in Q1FY22, India formulations grew 13%. US formulations grew to Rs 3244 crore, up 16% YoY as the specialty business has grown 29% YoY to US$191 million. Emerging Markets business grew 18% YoY to Rs 1891 crore. RoW Markets business grew 7% YoY to Rs 1468 crore. API segment posted growth of 11% YoY to Rs 654 crore. EBITDA margins declined 223 bps YoY, amid lower margins from Taro in Q1, and was at 26.8% on the back of higher employee and other expenses on a low base of Q1FY22 and Alchemee consolidation. Subsequently, EBITDA grew 2% YoY to Rs 2884 crore. Adjusted profit for exceptional items in base of Q1FY22, grew by 4% YoY to Rs 2061 crore.

Our perspective:

Specialty business grew 29% YoY driven by Ilumya, Cequa, Odomzo and Winlevi while US generics also grew due to new launches, market share gains and better supply chain management. India business continued to grow faster than market amid expansion of field force and robustness in new launches (22 in Q1). The company's US generics front is going through calibrated product rationalisation, the specialty segment looks promising due to robust product pipeline and steady progress. This metamorphic shift from generics to specialty and higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses.

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