NEW DELHI : Sun Pharmaceutical Industries Ltd’s Q4 program was rooted in India’s strong performance. However, moderation in the United States and the rest of global sales growth meant that overall performance remained off and below expectations. Thus, shares fell more than 3% in Friday morning operations.
Sales of branded formulations in India during Q4FY21, a ₹2,671 million, an impressive 12.9% year-on-year (year-on-year) growth. Domestic sales accounted for 31.7% of total sales. The U.S. ended dosing sales at $ 370 million, but saw a 1.3% year-over-year decline. In terms of rupee, US sales also fell 0.7% year-on-year. The U.S. contribution to global sales was similar to that of domestic sales.
With sales from emerging markets (17% of total) and other global sales (14% of total) also registering moderate growth of 5.5% and 2.8% year-on-year, it was not surprising that growth overall sales also moderated to 4.4%.
Reducing employee spending and costs, however, contributed to the expansion of gross margins. This meant Ebitda a ₹1,957 million, could grow by 55.8% year-on-year. Still, expectations are still missing. Analysts at Motilal Oswal Financial Services Ltd (MOFSL) expected Ebitda to arrive ₹2,101 million.
However, the moderation in sales in the United States was due to the weak Taro (sales of Sun’s US subsidiary). Taro continues to see price pressure on its strong dermatology portfolio. The impact was further accentuated by the smoothness of the prescription business due to the covetous distribution. The rest of U.S. businesses also saw the impact of covid on prescription flows.
Still, the positive is that the company’s U.S. specialty portfolio, which is key to future U.S. growth prospects, continued to perform well. Management stressed that the revenues of the specialized companies grew thanks to the increase in sales of products such as the Ilumya psoriasis treatment, the Cequa ophthalmic medicine and the Absorica acne treatment.
Analysts at Jefferies India Pvt. Ltd. said we believe that “the factors that led to the decline are seasonal / reversible and we are generating 12% revenue growth for Sun in fiscal 22.” This will be led by India’s business strength as well as post-covid Taro business normalization.
Other analysts also maintain their positive outlook. Analysts at Kotak Institutional Equities said that “Ilumya’s rise is on track, with sales of $ 143 million in 21 (51% year-on-year).” They expect the rise in the specialty segment to continue during the 22nd and 23rd years, driving strong profit growth.
It should be noted that strong performance in India supports confidence in Sun Pharma. National performance has continued to strengthen in recent quarters. MOFSL analysts have increased their earnings estimate by 9% and 8% for year 22 and year 23, respectively, given the high demand due to the covid and steady growth of the chronic segment and the recovery of the subchronic category in the segment of national formulations. The advantage of an expanded field strength nationwide and improved traction in the global specialty portfolio also helps with gains.
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