Sun Pharma (Q1 FY13)

India Infoline News Service | Mumbai |

Sharp NIM correction was a negative surprise; FY13 NIM could be materially lower than FY12

  • Revenue growth of 62% yoy and 14% qoq at Rs26.5bn; higher than our expectations (constant currency growth of 34% is largely in line with estimates)

  • Higher than expected growth was primarily led by better than expected growth in its US subsidiary, one-off like cancer drug Doxil in US and higher $ realisation

  • Domestic market adjusting for one-off of last year grew by 20% yoy to Rs5.9bn

  • US Formulation clocked in strong revenue growth of 147% yoy and 52.5% qoq to Rs15.4bn (105% yoy growth in constant currency basis)

  • EBIDTA margin at 45.8% is far above our expectation which is largely driven by Taro performance, business mix and better realization of Rupee

  • In line with sales, PAT accelerated by 63% largely on account of improved margin

  • We revise our rating to MP from Buy on the back of limited upside and revise our 9-month target price to Rs715.

Result table

(Rs m) Q1FY13 Q1FY12 % yoy Q4FY12 % qoq
Net sales 26,581 16,357 62.5 23,299 14.1
Inc/(dec) in stock (852) (866) (1.6) (1,073) (20.6)
Consumption of Materials (4,978) (4,511) 10.4 (4,960) 0.4
Pur of Traded Goods (897) (426) 110.5 (1,022) (12.2)
Employees' Cost (3,512) (2,786) 26.1 (3,480) 0.9
Other Expenditure (5,878) (4,026) 46.0 (5,346) 9.9
Operating profit 12,169 5,474 122.3 9,565 27.2
OPM (%) 45.8 33.47 1231 bps 41.05 473 bps
Depreciation (801) (647) 23.8 (823) (2.6)
Interest income (212) 316 (167.2) (112) 89.4
Other income (19) 653 (102.9) 2,181 (100.9)
PBT 11,136 5,796 92.1 10,811 3.0
Tax (1,924) (143) 1,248.1 (1,768) 8.8
Effective tax rate (%) 17.3 2.5 - 16 92 bps
PAT 9,212 5,653 62.9 9,043 1.9
Minority Interest & other Adj 1,256 643 95.2 841 49.3
Reported PAT 7,956 5,010 58.8 8,202 (3.0)
PAT margin (%) 29.9 30.63 (70) bps 35.2 (527) bps
Ann. EPS (Rs) 31 19.4 58.8 32 (3.0)
Source: Company, India Infoline Research

Sun Pharma reported revenue growth of 62% yoy and 14% qoq at Rs26.5bn; higher than our expectations (constant currency growth of 34% is largely in line with estimates)

Sun Pharma reported 62% growth in sales to Rs26.5bn in Q1 FY13, is far ahead of our expectation. Higher than expected growth in revenues is primarily led by higher than expected growth in its US subsidiary (Taro), one-off like cancer drug Doxil in US and forex impact. At constant dollars the growth is at 34% yoy, which is largely in line with our estimates.


Domestic market adjusting for one-off in last year grew by 20% yoy to Rs5.9bn

The company reported de-growth of 8% to Rs5.9bn in domestic sales in Q1 FY13. Excluding the impact of the nonrecurring sales, growth in the core business was 20% yoy. Sun has maintained its legacy in domestic market by growing well above ~16% growth in overall domestic pharmaceutical market.


Sales Breakup
Sales Breakup (Rs mn) Q1FY13 Q1FY12 % yoy Q4FY12 % qoq
India Formulations 5,877 6,385 (8.0) 8,767 (33.0)
US Formulations 15,411 6,220 147.8 10,106 52.5
ROW Formulations 3,666 2,521 45.4 3,226 13.7
Total Export Formulation 19,077 8,741 118.3 13,332 43.1
Total Formulations 24,954 15,126 65.0 22,099 12.9
Bulk 2,020 1,476 36.8 1,531 31.9
Others 18 2 1,014.6 8 123.5
Total Sales 26,992 16,604 62.6 23,638 14.2
 Source: Company, India Infoline Research

Cost analysis 
As a % of net sales Q1FY13 Q1FY12 % yoy Q4FY12 % qoq
Raw material 15.5 22.3 (676) 16.7 (116)
Purchases 3.4 2.6 77 4.4 (101)
Personnel Costs 13.2 17.0 (382) 14.9 (172)
Other Expenditure 22.1 24.6 (250) 22.9 (83)
Total costs 54.2 66.5 (1,231) 58.9 (473)
Source: Company, India Infoline Research

US Formulation clocked in strong revenue growth of 147% yoy and 52.5% qoq to Rs15.4bn (105% yoy growth in constant currency basis

The US Sales of finished dosage products recorded strong revenue growth of 147% yoy to Rs15.4bn. Sales in the US is US$285mn, up by 105% where sales of Caraco increased by 185% yoy and Taro posted revenue growth of 43% yoy to US$159mn.


The growth was led by better than expected growth in its US subsidiary, Taro and one-offs like cancer drug Doxil. In response to the critical shortage of the cancer drug Doxil, doxorubicin hydrochloride liposome injection, USFDA took proactive steps needed to increase available supply for patients in the US. US FDA allowed Sun Pharma to sell the product (sourcing type of arrangement). It’s a onetime but the effect was there in last and even this quarter as well. The company is not sure till what time it would be selling the product under this agreement. We expect core growth momentum in US will continue with new niche product launches and gaining market share in existing products. Positive trigger would be US FDA clearance of its Caraco facility in Detroit where remediation efforts are still ongoing.


EBIDTA margin at 45.8% is far above our expectation which is largely driven by Taro performance, business mix, one-offs and better realization of Rupee

Sun Pharma recorded an OPM of 45.8%

 

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