Headwinds plaguing the country’s largest drug-maker Sun Pharmaceutical will continue for next two-three quarters owing to pricing pressures and regulatory issues dogging its Halol plant, says a report.
The company’s Halol plant has been under the scanner of US Food and Drug Administration (USFDA) for alleged violations of good manufacturing practices.
According to American brokerage Jefferies, Sun’s fourth quarter results reflect that the key headwinds to recovery still persist, coupled with pricing pressure.
The Halol plant contributes 7-8 per cent of Sun’s sales and 15 per cent of its US sales. More than 50 per cent of Sun’s annual sales come from the US.
“Given the increased pricing pressure and significant investment, our base business recovery timelines are pushed out another 6-9 months,” Jefferies said in a note today.
The brokerage also noted that the firm’s fourth quarter revenue growth of 8 per cent was below expectations.
Sun had earlier this week reported a consolidated net profit of Rs 1,713.69 crore for the March quarter, up from Rs 889.24 crore in the same period the previous year.
The consolidated total income of the group increased to Rs 7,599.21 crore as against Rs 6,505.04 crore a year ago.
As per Jefferies, Halol remediation is still ongoing and should be completed by June end.
“This indicates a 3-4 month delay versus our expectation in resolution. It expects to invite the FDA for re-inspection by end June and we expect resolution by the fourth quarter,” the brokerage said.
The Sun counter closed 1 per cent down on the BSE at Rs 755.40, while the benchmark Sensex gained 46 points. The Sun stock is down 23 per cent from its 52-week high of Rs 979.25, while its m-cap stood at Rs 181,809.67 crore.