Sun Pharma performance muted; here’s why

By: | Published: September 29, 2016 6:13 AM

Sun Pharma’s (SUNP) FY16 annual report analysis highlights muted performance. Revenue grew just 3.2% to R283 billion while EBITDA margin expanded 70bp to 29.4%, led by gross margin expansion.

Sun Pharma’s (SUNP) FY16 annual report analysis highlights muted performance. Revenue grew just 3.2% to R283 billion while EBITDA margin expanded 70bp to 29.4%, led by gross margin expansion.

Contingent liabilities on tax disputes increased to R30.9 billion (FY15: R26.7 billion); cash tax paid (at R19.9 billion) was significantly higher than expensed (at R9.3 billion). Operating cash flow post interest increased from R52.7 billion to R64.7 billion on decline in other assets to R24.7 billion (primarily representing $400 million receivables for financing Protonix liability); however, this was partially offset by R18.1 billion increase in receivables. FCF deteriorated to R20.9 billion (FY15: R26.5 billion) on higher capex and acquisition of brands.

Goodwill and intangibles rose to R87.8b (28% of net worth). Cash and investments stood at R161 bn (51% of net worth), with 3% yield.

Tax rates remained low at 13.8%, primarily on account of low tax rates in certain subsidiaries (Sun Pharma Global FZE—0%) and Sun Pharmaceutical Laboratories (SPLL). On a consolidated basis, contingent liabilities increased steeply from R33.9 billion in FY15 to R41.8 billion (13% of net worth).

FCF post interest declined 21% y-o-y to R20.9 billion on rising capex and acquisition of brands. Operating cash flows were primarily supported by decline in other current assets by R24b, which was partially offset by increase in receivables by R18.1 billion.

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