Sun Pharma-arm Taro Reports Better Than Expected Q3 EBITDA Margin; stock up to 4%

Shares of Sun Pharmaceutical Industries rose 4% to Rs 841 on BSE in intraday trading on Friday after its subsidiary Taro Pharma reported better earnings before interest and depreciation and amortization (EBITDA) margins than expected for the December quarter (Q3FY22).

As of 12:47 p.m., Sun Pharma was up 3% at Rs 839, against a 1.3% gain in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 871 on January 13, 2022. Over-the-counter trading volumes tripled with a total of 3.9 million shares changing hands on the NSE and BSE until at the time of writing this report.

In Q3FY22, Taro’s EBITDA margins improved by 108 basis points year-on-year (YoY) to 31.3%, mainly due to better gross margins, while EBITDA decreased by 2.7% year-over-year to reach $47 million. Net income fell 20% year-on-year to $26.3 million. Revenue fell 0.8% year-on-year to $139 million.

Operating profit of $37.0 million was in line with the prior year quarter, and as a percentage of net sales it was 26.6% versus 25.9%, Taro said in a press release. . CLICK HERE FOR THE PRESS RELEASE

“Despite challenging market conditions, particularly in the U.S. generic market, Taro successfully defended market share in every business. Taro’s performance materially impacts Sun’s consolidated numbers, albeit on a scale reduced,” ICICI Securities said in a note.

Taro’s estimated contribution to Sun Pharma is 11% to revenue, 13% to EBITDA and 11% to PAT in Q3FY22. Although Sun continues to focus on specialty products in the United States, the recovery in Taro’s numbers bodes well for Sun Pharma, the brokerage said.

“Recovery in the specialties business, improved domestic sales as well as traction in other geographies would be the main growth drivers for Sun Pharma. Better traction in the specialties segment and improved domestic business to drive margin expansion, while tracking operating performance, earnings should see strong growth,” Sharekhan analysts said.

Sun Pharma’s Board of Directors is scheduled to meet on Monday, January 31, 2022 to review and approve the Company’s unaudited financial results for the three and nine months ended December 31, 2021.

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