Sun Pharmaceuticals Industries Ltd. Q4 FY 2022 Research Summary

Overview

Sun Pharmaceutical Industries Limited is an Indian pharmaceutical company. The headquarters is situated in Mumbai, Maharashtra. It was incorporated in 1983. The founder is Dilip Sanghvi. It is the largest Indian Pharma company in the US, and the 4th largest generic company globally. The company has its operation in 44 global locations, including United States, Asia, Africa, Australia and Europe. The company derives 30% of the total revenue from the United States. The company has a wide array of products which includes Pharmaceuticals, Branded generic drugs, over-the-counter drugs, and Specialty drugs, OTCs, APIs and ARVs. It provides API such as warfarin, carbamazepine, clorazepatte and also anticancer medicines, steroids, peptides and sex hormones.

Financial Snapshot

Currency in RS	3/30/2022	3/30/2021	3/30/2020	3/30/2019
Total Revenue	3842,64,200	3349,81,400	3283,75,000	2906,59,100
Gross Profit	2807,48,800	2361,27,200	2236,62,300	1982,71,500
Operating Income	810,00,200	641,78,400	493,54,300	472,46,700
EBIT	460,86,700	294,04,600	530,01,400	433,54,500

Consolidated Sales from Operation increased by 15.6% to Rs. 384,264 million. India formulation sales increased by 23% to Rs. 127,593 million. R&D investments increased to Rs. 22,194 million for FY22. EBITDA increased by 23.6% to Rs. 101,697 million. Net profit for full year FY22 stood  atRs. 32,727 million with an increase of 13% over last year.

For Q4 FY 2022 sales from operations increased by 11% to Rs. 93,861 million. India formulation sales increased by 16 % to Rs. 30,956 million. R&D investments stood at Rs. 5,433 million. EBITDA  increased by 14.6% to  Rs. 22,797 million. Adjusted net profit for the quarter  increased 18% to  Rs. 15,821 million. Reported net loss for Q4 FY 2022 is Rs. 22,772 million. The Company has repaid a debt of about 355 million in the current fiscal year.

Business Outlook

The company expects further expansion by 10% through brand promotion and geographical expansion. In terms of growth the company anticipates high single-digit to low double-digit consolidated top line growth for FY ’23. The R&D investments are expected to be between 7% to 8% of sales for the next year.

Business Segments

Specialty Medications-Sun Pharma has launched specialty medicines for global markets. The company is mainly targeting dermatology, ophthalmology and oncology sectors .The main focus is to improve patient outcomes by addressing the medical needs and serve them better.

Generic Medications-Sun Pharma produces high quality generic and branded medicines  for patients and doctors in more than 100 countries worldwide at affordable costs. The major  therapeutic segments covered are psychiatry, anti-infectives, neurology, cardiology, orthopaedic, diabetology, gastroenterology, ophthalmology, nephrology, urology, dermatology, gynaecology, respiratory, oncology, dental and nutritionals.

Over-the-Counter Medications- Sun Pharma has launched OTC medications for the patients. It includes  Faringosept (sore throat), Revital  (vitamins) and Volini (topical analgesics),Coldact&Flustat (cold & flu), Brustan, Painamol&Paduden (analgesics), Aspenter, Aspacardin, Nudrate&Fortifikat (lifestyle OTCs), Gestid (digestives) and Chericof (cough).

Active Pharmaceutical Ingredients- It is one of the vital components produced by Sun Pharma. As of today the APIs count exceeds 300 which is used in the house as well as marketed to customers in over 60 countries. There are both generics and complex APIs.

Anti Retro Viral Medications- Sun Pharma offers ARVs to various National AIDS treatment programs in Africa. The Highly Active Antiretroviral Therapy (HAART) has been added to the portfolio to combat HIV/AIDS.

SWOT Analysis

Strength – The company has a strong brand value in the U.S. as well as in India. It is the largest Indian pharma company in the US, and the 4th largest generic company globally. It has a strong presence in the Emerging markets. The introduction of Pantoprazole &Eloxatin in the US market is a major success. The acquisition of Taro Pharma has enhanced its position in the Indian market.

Weakness-Major part of the revenue is derived from the United States. Any economic factor can affect the revenue growth. The company has less visibility in the European markets. Moreover the healthcare business is inclined more on digital traction so to survive in this robust digital environment Sun Pharma has to build a new robust supply chain network. That can be extremely expensive.

Opportunity- The company can focus more on acquisition to enhance their growth in the Pharmaceutical Industry. As there is a healthcare awareness progressing in India the company can further enhance its business. Since the U.S. economy is constantly improving there is always a chance for Sun Pharma for further development.

Threat-There is a stiff competition with other players of the pharmaceutical industry. The rising cost of medicine is another major concern for this industry. There are lots of regulations like FDA approvals which are mandatory for this sector. The company is making a huge investment which is a Healthcare industry disruptor. The business of Sun Pharma can be impacted by the US and China trade war, Brexit impacting European Union, and overall instability in the Middle East.

Industry Analysis

Sun Pharma is a leading player in the Pharmaceutical Industry both in India as well as globally. For Q4 the market share stood at 8.86% compared to 8.59% for Q3. On a MAT basis, as per AIOCD data for March ’22 market share of Sun Pharma is 8.34%. The P/E ratio is 74.69 against industry standards of 30.96. Similarly the P/B ratio is quiet healthy, it  stood at 4.38 against industry averages of 4.73.

Comparative Study

Name	Market Capitalization (Rs Crore)	P/E Ratio	EV/ EBITDA	ROCE %
Sun Pharmaeutical Industry	1,22,390	169.55	16.75	10.1
Cipla	62,475	37.95	17.46	12.5
Lupin	45,730	0	18.69	6
Abott India	34,675	52.83	34.99	36.5
Aurobindo Pharma	46,916	15.77	9.69	10

PE ratio measures how much an investor pays for each rupee of profit earned. As per the investor perspective Aurobindo Pharma will be in a better position compared to Sun Pharma. EV/EBITDA is another valuation metric which helps to measure operating profit generated as compared to their Enterprise Value. Hence, lower the EV/EBITDA, the better its valuation. Here also Sun Pharma stands second in ranking. The ROCE measures how the company is earning profits by allocating its overall capital. From the investor viewpoint Abott India will be more preferable as it has the highest yield.

New Launches

Sun Pharma has added Winlevi to the portfolio. It has even taken care of a specialty portfolio with Ilumya launch and Cequa also in Canada. In Q4 FY 2022 Sun Pharma has launched  five new generic products in the U.S. market. It has even introduced generic mesalamine-extended release capsules in the U.S.

Strengthening Pipeline

Sun Pharma has invested a lot in R&D which could aid in growth in the coming years.  The mergers and acquisitions have also appeared beneficial for the company in the long run and growth in specialty segment. Moreover, doctors prefer this brand over the others.