Sun Pharma likely to take a big margin hit due to R&D and input cost pressures

Indian multinational pharmaceutical firm Sun Pharmaceutical Industries is likely to deliver subdued quarterly financial results, due on Friday, for the April to June 2022 period against a high base and with increased raw material costs eating into its margin, according to a CNBC-TV18 poll of analysts.

Analysts expect the pharma firm’s margin to squeeze to 22 to 26 percent against 29 percent in the year-ago quarter due to higher research and development, field force, and input costs as well as Alchemee integration. (Taro Pharmaceuticals USA Inc, a wholly-owned subsidiary of Sun Pharma’s US arm, acquired Alchemee in February 2022 for $90 million.)

Sun Pharma’s profit is likely to rise by 3.5 percent to Rs 1,496 crore compared to Rs 1,444.17 crore during the corresponding quarter last fiscal. Its revenue for the June 2022 quarter is expected to improve 2 percent on a year-on-year basis to Rs 9,939.4 crore compared to Rs 9,718.7 crore in the year-ago period, according to the poll.

Also, investors keenly await the pharma company’s management’s comments on sequential pick-up in specialty sales, which were flat in the previous quarter.

According to the CNBC-TV18 poll, US sales are estimated to have reached $390-410 million led by the sale of generic drug Pentasa, in addition to specialty sales. In India, meanwhile, growth would have been impacted by a high COVID-19 base coming off, analysts said and pegged domestic growth at 10-12 percent on an adjusted basis.

The Street will also watch out for change in the company’s guidance, which it expects to be between a high single to low double-digit growth for 2022-2023 fiscal.

Sun Pharma’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) is estimated to jump by 15 percent to Rs 2,395 crore for the quarter under review versus Rs 2,821 crore in the year-ago period.