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Sun Pharma: Numbers buoyed by significant beat in India formulations

News: Revenues grew 12.5% YoY to Rs.9625.9 crore (I-direct estimate: Rs.9482.2 crore). Indian formulations grew 25.9% YoY to Rs.3187.8 crore (I-direct estimate: Rs.2933.6 crore). US formulations grew to Rs.2677.3 crore (I-direct estimate: Rs.2749 crore), up 7.4% YoY. Emerging Markets business grew 15.5% YoY to Rs.1800.5 crore (I-direct estimate: Rs.1714.7 crore). RoW Markets business grew 5.3% YoY to Rs.1392.6 crore (I-direct estimate: Rs.1454.1 crore). API segment de-grew 10.2% YoY to Rs.498.5 crore (I-direct estimate: Rs.582.7 crore). EBITDA margins expanded 168 bps YoY to 27.3% (I-direct estimates of 23.7%) mainly due steady employee and other expenditure. Subsequently, EBITDA grew 19.9% YoY to Rs.2629.9 crore (I-direct estimate: Rs.2251 crore). Net profit grew 12.9% YoY to Rs.2047 crore (I-direct estimate: Rs.1485.7 crore).

Views: Sun Pharma’s Q2FY22 operational performance was better than I-direct estimates with growth in multiple segments moderated by decline in API sales. While the company’s US generics front is going through calibrated product rationalisation, the specialty segment looks promising due to robust product pipeline, steady progress. This metamorphic shift from generics to specialty, however, is likely to weigh on US growth in the near term. That said, higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY22. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front.