Target: ₹1,900
CMP: ₹1,732.25
Sun Pharmaceuticals’ Q1-FY25 result was a miss on revenue while EBITDA/PAT beat our estimates. Overall revenues grew 6 per cent y-o-y to ₹12,500 crore (our est. ₹13,000 crore), led by India/EM delivering 16/11 per cent y-o-y growth offset by muted US growth. API/ROW declined 8/1 per cent y-o-y respectively.
Gross margins expanded 200bps to 78.6 per cent (down 120bps q-o-q). EBITDA grew 11 per cent y-o-y to ₹3,500 crore with margins expanding 130bps y-o-y (+350bps QoQ) at 28.2 per cent (our est. 26.5 per cent). Adjusting for FX loss of ₹50.50 crore, PAT grew 26 per cent y-o-y to ₹2,900 crore (our est ₹2,600 crore) driven by higher other income (+2.5x YoY), lower finance costs (down 24 per cent y-o-y) and lower tax rate of 16.1 per cent (v/s 18.9 per cent in Q1-FY24).
Going forward, management expects specialty business to grow led by growth in key assets (Ilumya, Cequa, Winlevi). It expects R&D expense to be 8-10% of sales in FY25. The increase in R&D spend is largely for specialty portfolio. Moreover, India segment is likely to witness volume-led growth across therapies.
Accordingly, we raise our earnings estimates for FY25/FY26 by 8/4 per cent, factoring DF segment outperforming IPM and superior execution in global specialty sales.