Sun Pharma-arm Taro logs better-than-expected Q3 Ebitda margin; stock up 4%

Shares of Sun Pharmaceutical Industries moved higher by 4 per cent to Rs 841 on the BSE in Friday's intra-day trade after its subsidiary Taro Pharma reported better-than-expected earnings before interest tax and depreciation and amortization (EBITDA) margins for December quarter (Q3FY22).

At 12:47 pm, Sun Pharma was up 3 per cent at Rs 839, as compared to a 1.3 per cent gain in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 871 on January 13, 2022. Trading volumes on the counter jumped over three-fold with a combined 3.9 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

In Q3FY22, Taro's EBITDA margins improved 108 bps year-on-year (YoY) to 31.3 per cent mainly due to better gross margins while EBITDA de-grew 2.7 per cent YoY to $47 million. Net profit de-grew 20 per cent YoY to $26.3 million. Revenues de-grew 0.8 per cent YoY to US$139 million.

Operating income of $37.0 million was in line with the prior year quarter, and as a percentage of net sales was 26.6 per cent compared to 25.9 per cent, Taro said in a news release. CLICK HERE FOR NEWS RELEASE

"Despite the challenging market conditions, particularly in the US generic market, Taro successfully defended its market share across each business. Taro's performance has a substantial bearing on Sun's consolidated numbers albeit on a reducing scale," ICICI Securities said in a note.

Taro's estimated contribution to Sun Pharma is 11 per cent to revenue, 13 per cent to EBITDA and 11 per cent to PAT in Q3FY22. Although Sun continues to focus on specialty products in the US, recovery in Taro numbers bodes well for Sun Pharma, the brokerage firm said.

"Pick up in the specialty business, improvement in the domestic sales along with traction in other geographies would be the key growth drivers for Sun Pharma. The better traction in the specialty segment and improvement in domestic business to drive the margin expansion, while tracking the operating performance the earnings are expected to stage a strong growth," analysts at Sharekhan said.

The board of directors of Sun Pharma is scheduled to meet on Monday, January 31, 2022 to consider and approve unaudited financial results of the Company for the quarter and nine months ended December 31, 2021.