Leading generics/specialty pharma company, Sun Pharma posted a mixed performance in Q4FY23 with revenue coming in line with expectations, however, the EBITDA margin was a miss. Sun Pharma also recommended the final dividend for FY23. Brokerage ICICI Direct has recommended buying Sun Pharma stock after the Q4 numbers.
On Friday, Sun Pharma’s stock reacted positively to the earnings and ended at ₹970.65 apiece up by 2.75% on BSE.
During the fourth quarter of FY23, Sun Pharma reported a consolidated net profit of ₹1,984 crore, compared to a net loss of ₹2,277 crore a year ago same period. Revenue climbed by 15.7% YoY to ₹10,930.6 crore. EBITDA also zoomed by 19.7% YoY to ₹2,803 crore.
The top-line front’s year-on-year growth was supported by double-digit growth in the specialty segment and robust sales in the domestic formulations business, along with some contribution from the sales of the generic Revlimid in the US market.
On Friday, Sun Pharma also announced a final dividend of ₹4 per share for FY23. This is in addition to the interim dividend of ₹7.5 per share paid in FY23, taking the total dividend for FY23 to ₹11.5 per share compared to ₹10 per share for FY22.
In its note, ICICI Direct Research on Sun Pharma’s Q4 results said, “Revenue in line but the mixed trend in profitability- significant GPM beat but EBITDA margin missed estimate on higher-than-expected other expenses.”
What should investors do?
As per the brokerage’s note, Sun Pharma’s share price has grown at a CAGR of 28.15% over the past three years.
It said, “We maintain BUY as 1) Global specialty portfolio continues to maintain momentum, 2) Growth in India formulations from new launches and field force expansion, and 3) revenue mix continues to tilt towards more remunerative businesses.”
The brokerage has set a target price of ₹1140 i.e. 28x P/E on FY25E EPS of ₹40.8.
Here are key triggers for the future performances of Sun Pharma’s stock as per the brokerage:
– Higher contribution from specialty to overall revenues (from 13% in FY22 to ~16% by FY25E) and sustained momentum in India branded formulations to improve product mix and margins profile as US generics slow down.
– In the US, Sun has diversified into specialty products like Ilumya, Levulan, BromSite, Cequa, Xelpros, Odomzo, Yonsa, Winlevi, etc. Developments on the deuruxolitinib (8 mg) front in the backdrop of a recent partial clinical hold by the USFDA for 12 mg.
– In India, launch momentum, pick-up in demand for chronic and sub-chronic segment backed by high PCPM and field expansion to lead further growth.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 27 May 2023, 09:28 PM IST