Sun Pharmaceuticals Industries Ltd's Q2FY19 consolidated net profit rises 9.15% yoy to Rs995.56cr: Misses Estimates

The company’s consolidated revenue in the quarter stood at Rs6,937.63cr, up 4.32% yoy but down 3.97% qoq.

Nov 14, 2018 03:11 IST India Infoline Research Team

Sun Pharmaceuticals Industries Ltd Q2FY19

Consolidated Results Q2FY19: (in Rs cr)

Q2FY19 YoY (%)
Revenue 6,937.63 4.3
EBITDA 1,531.21 11.3
EBITDA Margin (%) 22.1 139
Net Profit (adjusted) 995.56 9.2
***EBITDA margin change is bps
Sun Pharma’s revenue in Q2FY19 grew 4.3% yoy to Rs6,937.6cr. The growth in revenue was slowed due to the decline in its domestic and US base revenue. EBITDA in the quarter grew 11.3% yoy to Rs1,531.2cr vs. Rs1,375.6cr in Q2FY18. EBITDA margins expanded 139bps yoy stood at 22.1% in Q2FY19 vs. 20.7% in Q2FY18 and 22.2% in Q1FY19. The company, however, reported a net loss of Rs218.8cr in Q2FY19 vs. a net profit of Rs912.1cr in Q2FY18 and a net profit of Rs982.5cr in Q1FY19. 

During the quarter, the company has reported a one-time exceptional expense of Rs1,214.4cr. This includes the $150.5mn settlement amount for an antitrust litigation for the drug Modafinil. Adjusting for this, PAT grew 9.2% yoy to Rs995.6cr. We had expected revenue/EBITDA/PAT of Rs7,633cr/Rs1,660cr/Rs1,015cr, respectively. Hence, the reported and adjusted numbers are below our expectations.

Other highlights
  • India sales declined 16% yoy to Rs1,860cr in Q2FY19. This was due to a planned one-time inventory reduction in the supply chain as well as a higher base of Q2FY18. Sun Pharma holds ~8.3% market share of the Indian pharmaceutical market.  The revenue in India was 19.5% below our expectations in the quarter.
  • US sales grew 11% yoy to $342mn. Taro posted Q2FY19 sales of $159mn, down 6.4% yoy. Ex-Taro, Sun Pharma’s sales declined grew 32% yoy but was down 19% qoq. The US sales were 10% below our expectations.
  • Emerging markets sales were flat (yoy) at $195mn, while ROW sales declined 2% yoy to $108mn in Q2FY19.
  • R&D investments in Q2FY19 stood at Rs452cr (6.6% of sales) vs. Rs511cr (7.7% of sales) during Q2FY18.
  • Gross margins in Q2FY19 stood at 74.7% vs. 71.8% in Q2FY18 and 70.8% in Q1FY19. This is the best gross margin performance over the past eight quarters.
  • Employee cost grew 11.1% yoy, while other expenses grew 5% yoy.
  • The improvement in the EBITDA margin was largely due to the improvement in the gross margins. EBITDA margins reported at 22.1% were above our expectations of 21.7%.

Technical View:

Sun Pharmaceuticals Industries Ltd ended at Rs561.70, down 27.85 points, or 4.72%, from its previous close of Rs589.55 on the BSE.
The scrip opened at Rs594.90 and touched a high and low of Rs594.90 and Rs556.05, respectively. A total of 99,70,154 (NSE+BSE) shares were traded on the counter. The stock traded above its 50-DMA.

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