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Sun Pharma: Outpacing continues

Jul 30, 2001

Sun Pharma has reported a net profit growth of 34% in 1QFY02 mainly on the back of better product mix. Operating margins have inched up further to 27.9%, increasing by 80 basis points. Operating margins of the company continue to be the best in the industry, due to strong brand presence in high margin cardiovascular segment.

(Rs m)1QFY011QFY02ChangeFY01
Sales 1,327 1,672 26.0% 6,132
Other Income 5 10 98.0% 67
Expenditure 967 1,205 24.6% 4,625
Operating Profit (EBDIT) 360 467 29.9% 1,507
Operating Profit Margin (%)27.1%27.9%24.6%
Interest (3) (8.7)163.6% (21)
Depreciation 38 41 10.1% 152
Profit before Tax330 444.1 34.5% 1,444
Other Adjustments - -
Tax 20 29 46.9% 95
Profit after Tax/(Loss) 311 415 33.7% 1,349
Net profit margin (%)23.4% 24.8%22.0%
No. of Shares (eoy) (m) 46.8 46.8 46.8
Diluted Earnings per share*26.5 35.5 28.9
P/E (at current price) 17.1 21.0

Domestic branded formulations grew by 26%, which has come as a positive surprise. In domestic branded business, the company launched 11 products in the quarter across various high margin therapeutic segments such as cardiovascular, diabetes, opthalmology and arthritis. Exports grew by 90%, helped largely by the company's merger with Sun Pharma Exports. However, excluding the merger effect export growth was sluggish. Caraco Pharma, the US affiliate of the company has posted a loss of US$ 1.7 m for the quarter ended in March'01. The mounting losses of Caraco is a major concern for Sun Pharma. Caraco Pharma has recently received 3 FDA approvals, which may help the company to come out of the red.

At Rs 528 the company trades on a multiple of 17x annualised earnings for 1QFY02. The low valuations accorded to the stock compared to its peers in the sector appear mainly on account of Caraco losses, which remain the biggest trigger for the stock.

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