Sun Pharma shares rise despite 36 percent profit drop

Sun Pharmaceutical Industries shares closed 0.87 percent higher at 1,778.25 rupees on the BSE on Friday, even though the drugmaker reported a 36.36 percent year-on-year drop in net profit for the September quarter. The company posted a consolidated net profit of 1,988.53 rupees for the July-September period, compared to 3,124.95 rupees in the same period last year. Total revenue from operations grew 11.9 percent year-on-year to reach 16,198.71 rupees.

Business Growth

Domestic formulation sales in India increased by 17.3 percent to 5,552.3 rupees, making up 34.5 percent of total sales. Global innovative medicines sales rose by 6.9 percent to around 356 million dollars, contributing 21.1 percent to revenue, while emerging markets added 20.7 percent. Managing Director Kirti Ganorkar noted that growth was driven by strong momentum in India and international markets, along with products such as Ilumya, Ciqua, and Odumzo. Ilumya recently received US approval for treating adults with active psoriatic arthritis, and the company licensed lerodalcibep for markets outside the US and China.

Costs And Litigation

The profit decline was mainly caused by exceptional expenses linked to a proposed acquisition of Organon and US litigation. Total expenses rose to 12,287.83 rupees compared to 10,780.62 rupees a year ago. Exceptional charges reached about 1,269 rupees, including roughly 923 rupees for settling a US generic-pricing antitrust litigation case and 346 rupees for Organon acquisition expenses. The company expects the Organon transaction to finish by early 2027.

Brokerage View

Choice Institutional Equities kept a 'Buy' rating on the stock with an unchanged target price of 2,300 rupees. The brokerage noted that core business performance remained healthy during the quarter. While trimming FY27 and FY28 earnings estimates by 3.6 percent and 1.1 percent respectively due to near-term US pressure, the brokerage expects an 11.7 percent revenue compound annual growth rate over the next three years excluding Organon.

Context

Pharmaceutical companies often experience profit fluctuations due to heavy investments in research, global regulatory approvals, and legal settlements related to overseas markets. Large drugmakers generally rely on a mix of strong domestic sales and high-margin specialty products abroad to offset rising costs and legal expenses.