Sun Pharma drops 3% on profit booking after March quarter results

Shares of Sun Pharmaceutical Industries fell 3% to Rs 676 on BSE in intraday trading on Friday as investors booked profits after the company reported lower-than-expected profit after tax (PAT) in the quarter of March (Q4F21) due to reduce other income.

Over the past three months, the stock has outperformed the market, gaining almost 20%, against a 4.6% rise in the S&P BSE Sensex, through Thursday.

Sun Pharma on Thursday reported a 124% year-on-year (YoY) increase in net profit in the fourth quarter of fiscal 2020-21 to Rs 894 crore, mainly on operational efficiency and a base low in the corresponding quarter last year.

The company said it is evaluating the development of a new biosimilar pipeline as an R&D goal. She also requested an inspection of the Halol site in Gujarat. Compared to net profit of Rs 636 crore in the fourth quarter of FY2019, the upside is around 40%. The year 2019-2020 was partially affected by the Covid-19 pandemic, thanks to national confinement in early March. It impacted sales.

Sun Pharma’s consolidated operating sales amounted to Rs 8,431 crore, up 4.4% year-on-year, and compared to the fourth quarter of FY2019, they increased by 19%. Sales, however, were down 4% sequentially. The company said the fourth quarter of FY20 sales had one exceptional item (one-time US activity) and therefore the numbers were not strictly comparable.

Sun Pharma recorded earnings before interest, tax, depreciation and amortization (Ebitda) of Rs 1,956.8 crore, up 56% from the fourth quarter of last year, with an Ebitda margin of 23 .2%. The company said higher operational efficiencies helped margins.

“Fourth quarter operating performance was in line with I-direct’s estimates while PAT was below expectations due to lower other income. As the company’s US generics front goes through a calibrated product rationalization , the specialty segment looks promising due to a robust product pipeline and steady progress. However, this metamorphic shift from generics to specialty is likely to weigh on U.S. growth in the near term,” ICICI Securities said in a statement. note.

That said, a higher contribution from the specialty and strong national franchise is likely to shift the product mix towards higher paying businesses by FY23. This would also have positive implications for margins, as we expect faster absorption of anticipated costs on the specialty front. That said, amid the recent surge, the stock priced in most of those aspects at current levels, the brokerage said.

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