Sun Pharma Industries Ltd. Q2FY25 Result First Cut – Strong seasonality and robust specialty segment growth outperformed the quarter

By- Prathamesh Masdekar, Research Analyst, StoxBox

– The company reported revenue growth of 9.0% YoY and up 5.0% QoQ to Rs. 12,291 crores, which was in line with market expectations of Rs. 13,281 crores, fuelled by double-digit growth across key markets, particularly the US market.
– Domestic formulations business grew 11.0% YoY, further aided by 20.3% and 3.2% annual growth in US formulations (including Taro) and Emerging Markets, respectively.
– As per AIOCD AWACS MAT Sept 2024 report, Sun Pharma is ranked no. 1 and holds an 8.1% market share of over Rs. 2,170 billion in IPM. For Q2FY25, the company launched 14 new products in the Indian market.
– EBITDA increased 23.9% YoY / up 9.2% QoQ to Rs. 3,939 crores, while EBITDA margin stood at 29.6% (above 356bps YoY / up 112bps QoQ) in Q2FY25, owing to an expansion in gross margins by 259 bps YoY to 79.7% led by favourable product mix.
– Profit after Tax stood at Rs. 3,040 crores (up 28.0% YoY / up 7.2% QoQ) in Q2FY25, above market expectations of Rs. 2,932 crores. PAT margin rose to 22.9% versus 22.4% in the previous quarter.
– R&D investments for Q2FY25 stood at Rs. 792.9 crores (6.0% of sales), compared to Rs. 773.4 crores in Q1FY24.

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The pharma giant reported a strong financial performance in Q2FY25, attributing the outperformance to strong seasonality and robust specialty segment growth. The US market led the revenue growth in the September quarter, with the global specialty business continuing to increase its share in the overall revenues. The margin expansion was due to a higher contribution from specialty products, particularly in the US market. Further, Sun Pharma invests heavily in research and development (R&D) to support its specialty pipeline. The company’s API business imparts benefits of vertical integration and supply chain continuity for formulations business. The company continues to focus on increasing API supply for captive consumption of key products. Sun Pharma recently strengthened its specialty pipeline through an agreement with Philogen to commercialise late-stage candidate Fibromun upon approval. With Fibromun, the product basket for dermatologists has expanded further. The company shall continue to leverage a strong cash position to strengthen the pipeline. Further, the company will actively look for other new investment avenues for growth across all business segments in the coming years.