The company's Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins expanded 361 basis points YoY to 25.6 per cent mainly due to better product mix (higher specialty sales) and lower other expenditure. Revenues, however, grew 5.3 per cent YoY at Rs 8,553 crore during the quarter. The company said sales of specialty products have improved sequentially with Ilumya and Cequa reaching pre-Covid levels.
“Sun Pharma’s Q2FY21 results were above estimates on all fronts mainly on account of better than expected operational performance, tax gain on creation of deferred tax assets, higher other income and lower interest expenses,” ICICI Securities said in a note.
While the company’s US generics front is going through calibrated product rationalisation, specialty segment looks promising due to robust product pipeline, steady progress. This metamorphic shift from generics to specialty, however, is likely to weigh on US growth in the near term. That said, higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY22. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front, the brokerage firm said.
Motilal Oswal Securities increased its earnings estimate by 22 per cent/5 per cent for FY21/FY22E, factoring in increased contribution from the Specialty portfolio and lower opex for an extended period on account of COVID. The brokerage firm remains positive view on Sun Pharma on account of a better outlook for its Specialty portfolio, a robust ANDA pipeline, and increasing market share in the Branded Generics segment.
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