Sun Pharma Q1FY23 Result reports a robust performance

Sun Pharmaceutical Industries Limited, together with its subsidiaries and associates (Sun Pharma), is the fourth largest global speciality generic corporation, ranking 1st in India and 8th in the United States. The company makes and markets a diverse range of pharmaceutical formulations for chronic and acute therapy. It comprises generics, branded generics, technology-intensive goods that are complex or difficult to manufacture, over-the-counter (OTC) drugs, antiretrovirals (ARVs), Active Pharmaceutical Ingredients (APIs), and intermediates.

Sun Pharma, announced its results for the Q1FY23 on July 29, 2022, in which Profit after tax (PAT) increased by 53.9% year on year to Rs. 2,060.88 crores, compared to Rs. 1,444.17 crores in Q1 FY22.

Let’s now dig deeper into the fundamentals of Sun Pharma and analyse their Q1FY23 performance.

Key Highlights of Sun Pharma Q1FY23 Result

• Gross sales were 10,644.0 crores in Q1FY23, a 10.1% YoY increase.
• PAT climbed by 53.9% year on year to Rs. 2,060.88 crores in Q1FY23, compared to Rs. 1,444.17 crores in
• In Q1FY23, revenue from operations climbed 73% year on year to Rs. 10,761.76 crores.
• In Q1FY23, EBITDA was reported at 2,884.4 crores, with an EBITDA margin of 26.8%.
• EPS rose to 8.6 in Q1 FY23, up 43.33% year on year from Rs. 6.0 in Q1 FY22.
• R&D investments fell to 460.8 crores in Q1 FY23 from Rs. 592.6 crores in Q1 FY22.

Adj. PAT Increased by 30% QoQ, while EBITDA rose 2% YoY

This increase in profits is supported by a 10.73 % YoY increase in Sun Pharma’s revenue from operations, which was at Rs. 10,761.76 crores in Q1 FY23, compared to Rs. 9,718.74 crores in Q1 FY22. There was also a decrease in the company’s financing costs and an increase in the gain on foreign currency transactions, which helped Sun Pharma achieve its superb performance in the quarter.

The pharmaceutical giant’s gross sales were Rs. 10,644 crores, a 10.1 % increase over the same period the previous year. Excluding Covid product sales in Q1 FY22, overall sales in Q1 FY23 increased by nearly 14 % year on year.

The company’s EBITDA was recorded at Rs. 2,884.4 crores in Q1 FY23, including other operational revenues, with an EBITDA margin of 26.8 % in the first quarter.

Segment Wise Performance

Looking at performance based on geographical presence, India formulation sales were Rs. 3,387.1 crores, up 13% YoY on a like-to-like basis, excluding Covid product sales from the first quarter of last year. The US formulation sales were US$ 42 million, representing a 10.7 % increase YoY. Emerging Markets formulation sales were reported at US$ 24.5 million, a 12.6 % increase year on year.

Revenues from the Rest of World formulations were US$ 19 crore, a 2.6 % increase year on year. However, R&D investments, which are one of the major criteria that analysts and investors monitor, fell to Rs. 460.8 crores in Q1 FY23 from Rs. 592.6 crores in Q1 FY22.

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Increasing Market Share

Sun Pharma was placed first in the Indian pharmaceutical market, according to the AIOCD AWACS MAT June-2022 report, with its market share increasing to 8.5 % in Q1 FY23 from 8.0% the previous year.

The company launched 22 new goods in the Indian market in the quarter ending 30th June 2022.

Market Reaction

The company’s earnings per share (EPS) in this quarter were Rs. 8.6, up 43.33 % year on year from Rs. 6.0 in Q1 FY22. The Sun Pharma share reacted well to the quarterly results, which were announced during market hours, and traded at Rs. 931.75 per share, up 4.12 %, at around 1:54 pm, minutes after the result

Q1FY23 Earnings Con Call Updates

• Employee spending grew in Q1FY23 as a result of annual merit increases, Alchemee integration, and salesforce development in India. Other expenses are also rising as a result of greater selling and administration costs as a result of market normalisation and Alchemee company
• In emerging markets, the company is seeing good traction for branded business, which has been influenced in part by currency instability in emerging
• Sales were up 13% in the first quarter of last year when Covid products were excluded. The chronic and sub-chronic segments drove The company continues to outperform IPM, increasing its market share by 0.5% year on year to 8.5%. In the first quarter, the company introduced 22 new goods. Around 25 firms have introduced Sitagliptin; Sun has a 33% market share, and management is guiding to protect and grow the current share.

Technical Analysis

As it approached 52 Week High Level, Sun Pharma’s Share price has seen some correction in a day. A inverted Head and Shoulder pattern forming can be seen on the chart and It broke the resistance of the pattern with a good volume. It can be interpreted as a trend reversal if it sustains the level of 900- 910 and remains above MA 50. Additionally, after the Q1FY23 data is released, investors may want to think about buying Sun Pharma with a medium- to long-term outlook due to its sound fundamentals.

Management View

Sun Pharma’s operational performance in Q1FY23 exceeded projections, including a thorough margin beat. All business segments expanded well, with the speciality business growing by 29% year on year, thanks to Ilumya, Cequa, Odomzo, and Winlevi. India’s business continues to develop faster than the market, resulting in a larger market share.

The company’s US generics front is undergoing calibrated product rationalisation, while the speciality segment appears optimistic thanks to a healthy product pipeline and consistent improvement. This metamorphic move from generics to speciality, as well as a stronger contribution from speciality and a strong domestic franchise, is projected to alter the product mix toward more profitable industries. This would have a beneficial impact on margins as we anticipate greater absorption of frontloaded expenses in the speciality sector.

Our view

The pharmaceutical sector for a long time has been among the laggards in the stock market. The results for Sun Pharma indicate its growing exports to the US markets. Overall better-than-expected performance from Sun Pharma is expected to draw attention to the pharmaceutical sector and Sun Pharma is a stock from the sector that has the potential to head higher from here.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

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