Sun Pharma Q2 revenue beats estimates, profit falls 36%

Sun Pharmaceutical Industries Limited reported September quarter revenue of ₹16,198.7 crore, up 12% year-on-year and above estimates. EBITDA reached ₹4,743 crore, beating expectations, while net profit fell 36% due to exceptional costs. Revenue exceeded the CNBC-TV18 poll estimate of ₹15,766.1 crore. EBITDA also beat estimates of ₹4,403 crore, with margins at 29.3% against 31.3% a year ago. Although margins contracted year-on-year, they exceeded the 27.9% estimate. Net profit stood at ₹1,988.5 crore, below the ₹3,085 crore estimate. The key reason was an exceptional loss of ₹1,270 crore linked to legal, commitment and acquisition-related costs for Organon. Management expects some additional acquisition expenses in subsequent periods. US sales came in at $455 million, matching estimates but declining 8.2% year-on-year. Emerging market formulation sales grew 7.6% to $350 million, while global innovative medicines sales increased 6.9% to $356 million. API sales rose 13.7% to ₹488.9 crore. My view: The operating performance was stronger than the headline profit suggests. Revenue growth and an EBITDA beat indicate that underlying business performance remains healthy, while margins exceeded expectations despite the annual decline. However, falling US sales and continuing Organon-related costs remain key risks. The next trigger will be US business growth, margin recovery and the pace at which exceptional acquisition costs ease. Sun Pharma shares gained as much as 3.5% following the results. I would watch whether the stock sustains this move and whether subsequent quarters show improvement in US sales and margins before taking a stronger bullish stance.

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