Sun Pharma Q2 Results Review - Another Quarter Of An Earnings Beat: Motilal Oswal

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A bird flies past the logo of Sun Pharma installed on the facade of its corporate office in Mumbai. (Photo: Francis Mascarenhas/Reuters)

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Motilal Oswal Report

Sun Pharmaceutical Industries Ltd. delivered a better than expected Q2 FY23 earnings, led by superior execution in the specialty portfolio, U.S. generics (excluding Taro), and the domestic formulation segment; benefits from the production linked incentive scheme; and a favorable currency movement.

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As a percentage of sales, research and development spends remain low at 5.3% versus the management's guidance of 6-8% for FY23, further boosting profitability in Q2.

We have raised our FY23/FY24 earnings per share estimate by 7%/5% to factor in:

  1. enhanced traction in the specialty portfolio,

  2. industry outperformance in branded generics of the DF segment and in emerging markets,

  3. reduced R&D spends, and

  4. better operating leverage.

We remain positive on Sun Pharma on the back of an increased prescription base for the specialty portfolio, robust franchise building in branded generics, niche abbreviated new drug application pipeline awaiting approval, and controlled cost.

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