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Impressive results from Sun Pharma

Jan 16, 2001

Sun Pharma has reported a 49% growth in net profits in the third quarter of the current year on the back of a 41% growth in the topline. Formulations, which account for 66% of the company’s turnover grew by 39% in the third quarter while bulk drugs grew by 43%. Sun Pharmaceuticals manufactures formulations in niche segments such as psychiatry, cardiovascular, gastroentology and neurology. The company has also managed to improve its margins in the third quarter by 190 basis points despite the fact that Gujarat Lyka (which produces bulk drugs) has been amalgamated with Sun Pharma in the current year.

(Rs m) 3QFY00 3QFY01 Change
Sales 1,124 1,578 40.4%
Other Income 16 14 -10.1%
Expenditure 865 1,185 36.9%
Operating Profit (EBDIT) 259 393 52.0%
Operating Profit Margin (%) 23.0% 24.9%  
Net Interest - -  
Depreciation 30 40 31.4%
Profit before Tax 244 368 50.6%
Other Adjustments   -  
Tax 15 27 83.9%
Profit after Tax/(Loss) 229 340 48.4%
Net profit margin (%) 20.4% 21.6%  
Earnings per share* 19.63 29.13  

What is encouraging for the company is the continuous growth in formulation exports, which have almost quadrupled in the third quarter. A primary reason for the stupendous growth is the amalgamation of Sun Pharmaceutical Exports during the quarter.

Also, Sun has been extremely aggressive in the launch of new products in the domestic market with 24 new product launches in the first nine months of the current year which has helped it maintain its dominance in the cardiovascular, diabetes and central nervous system.

Perhaps the only area of concern is the continuing losses of its US based affiliate Caraco Pharma, which is the company’s vehicle for launch of generics. (Sun has invested Rs 288.63 m towards equity and Rs 252.86 m towards debt in Caraco, which is expected to register a loss of around $ 6 m for the year ended December 2000, although it has not announced the same.) Caraco has submitted around nine abbreviated new drug applications (ANDA) which are awaiting US FDA approval and only after their approvals can revenues start to flow in. Sun has however not provided for this diminution in the value of its investments in its books.

The stock quotes at Rs 560 which implies an earnings multiple of 19.2 times FY01 annualised earnings.

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