The pressure on earnings is likely due to flat growth for the arm Taro Pharma, weak US generic sales as a result of product restrictions at its Halol and Mohali facilities, higher R&D spending and remediation charges.
Revenue is estimated to rise 7.5 per cent year-on-year (YoY) to Rs 11,573 crore. On a QoQ basis, this could be 6 per cent higher.
Taro Pharma last week reported a 1.4 per cent revenue growth to $159 million for the June quarter, while its net profit dropped 29 per cent to $10 million.
Sun Pharma’s India sales is seen growing firmly at 7-10 per cent YoY. This, coupled with the strong US specialty growth, will offset the weakness in the generic segment, analysts said.
Nirmal Bang and PhllipCapital expect US specialty business to grow 31.6 per cent and 25 per cent YoY, respectively, driven by continuous scale-up in sales of Winlevi, Ilumya and Cequa.
While for the generic segment, the company faced severe volume and market share erosion in gDoxil and gAmbisome, as per Systematix. “Further, the import alert at its Halol facility and non-compliance letter at the Mohali facility will likely continue to be a drag on the US generics business in Q1,” it said.
Thus, sequentially, US sales could decline by as much as 4 per cent to $412 million, as per Kotak Institutional Equities. While PhliipCapital pegs this at $441 million. In Q1FY23, the US sales of the company was worth $420 million.
KIE also bakes in a 140 bps QoQ decline in the Ebitda margin for Sun Pharma (YoY decline of 100 bps) driven by higher R&D expenses (seen at 6.9 per cent of sales).
“Gross margin was abnormally high in 4QFY23 and should normalize to 76 per cent (fall of 340 bps QoQ). The firm has given guidance of higher R&D expenses for FY24, though we expect a ramp-up only in the coming quarters. We expect the margins to decline by 70 bps sequentially in Q1”, said analysts at InCred Equities.
Sequentially, the profit will also normalise sharply given the exceptional gains in the March quarter.
“In 4QFY23, the company had reported exceptional items worth Rs 170 crore, due to impairment charges, settlement claims and acquisition-related expenses for Concert Pharma. Adjusted for these, net profit is seen falling 15 per cent QoQ in 1QFY24,” said KIE.
Sun Pharma’s Ebitda (earnings before interest, tax, depreciation and ammortisation) is estimated at Rs 3,111 crore by Nirmal Bang, while this is seen at Rs 2694 crore by analysts at Systematix. In the year-ago period, Sun Pharma had reported an Ebitda of Rs 2,884 crore.