Sun Pharma closes FY14 with an all-growth story

As Sun Pharma braces itself for a tough year ahead when it may have to focus on integrating Ranbaxy into its fold, it can take satisfaction from having closed FY14 with an all growth story, generally meeting market expectations.

Not many analysts see surprises in the Sun Pharma results for the fourth quarter and for the full year.

For the fourth quarter of FY14, Sun Pharma has posted a net profit of Rs 1,587 crore, up 57 per cent, with net sales of Rs 4,044 crore, up 32 per cent. For the full year (FY14), its net sales stood at Rs 16,004 crore, up 42 per cent and an "adjusted net profit Rs 5,722 crore, up 60 per cent".

Significantly, its US finished dosage sales during the year were $1,620 million growing by 43 per cent (in US dollar terms) over the same period last year.

This comes at a time when most Indian companies are struggling with the challenges of price control and posting an industry average growth of around seven to eight per cent in the Indian market.

"India branded generic sales (were) at Rs 3,692 crore, a growth of 25 per cent over last year," says the press release. "Normalizing for lower sales in Q1FY13, adjusted growth at 17 per cent for FY14. This growth has been achieved despite the implementation of the new pricing policy and trade channel disruptions."

Analysts point out that part of the reason could be Sun Pharma's therapy focus in India. Sun Pharma in India is focused on the chronic segment (read lifestyle diseases like diabetes, hypertension etc and this segment tends to grow faster, has the attribute of repeat customer (once a person becomes a hypertension or diabetic patient, he needs medicines all the time and will be a customer for life). Plus, most importantly, this segment is generally believed to be one on which the Drug Price Control Order has smaller impact.

However, while the company has been able to buck the industry trend and shown a good growth, analysts will now be watching how it not just sustains this but also merger into its fold Ranbaxy, which could mean lot of work in trying to sort out regulatory and other challenges that Ranbaxy faces plus deal with a larger portfolio of drugs (Ranbaxy is strong in the acute therapy segment, which is malaria, cough, cold etc).

Surajit Pal of Prabhudas Lilladher for instance, pointing out that there little surprises in the results and were largely on expected lines, feels going forward sustaining growth will be a bit of challenge. But the company may well keep the growth momentum growing. For the moment, its guidance for FY15 talks of a consolidated FY15 revenue growth guidance of 13-15 per cent, R&D spending at 6-8 per cent of revenues, 25 ANDA filings targeted in US and capex of Rs 900 crore.

"The company's press release also reminds that this guidance takes in to account the higher base of FY14 as well the risks associated with increase in competition for some products." Also, it says, the "guidance excludes the impact of the proposed acquisition of Ranbaxy pending the deal closure."

Those in the company are however confident and as a senior official pointed out, "last year, same time we had given a guidance of 18 to 20 per cent." The company ended up with a 42 per cent growth in net sales.

Can it repeat the show in FY15 with Ranbaxy along?