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Sun Pharmaceuticals (SUN.BO)
Alert: Big Beat; Await Details in Earnings Call
Sun’s 2Q results beat estimates by a wide margin, mainly led by higher than
expected sales in Caraco. The earnings call should provide more clarity on the
sustainability of this upside.
Big Beat in 2Q – Sun’s 2Q net income beat our estimates by c54%. This is almost
entirely top line led, with international formulations sales coming in much higher
(c63%) than we forecast. EBIDTA margins were largely in line, leading to the top
line beat flowing through to the bottom line.
The Numbers – Sales grew 15% YoY. India sales clocked growth of 34% - partially
due to the lower base in 2QFY10 (channel filling in 4QFY09). The big surprise was
however on international formulation sales (+2% YoY) – this appears mainly
Caraco led (sales up 25% YoY). EBIDTA margins at 34% were down 420bps &
largely in line with expectations. Net income grew 9% YoY.
How Much is Sustainable? – We expected products such as generic Effexor XR
tabs & Exelon (joint exclusivity) to contribute to numbers in 2Q. But actual
numbers are much higher than we expected. We await clarity from management
on sustainability of these numbers.
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