Sun Pharma.Inds. Q1 FY27 Results (NSE: SUNPHARMA)
Signal: Margin pressure
The read
Consolidated revenue growth accelerated to 10.5% YoY from 8.9% in Q4FY26 and 8.1% in Q3FY26, driven by global specialty and generic sales; EBITDA margin contracted 130bps YoY to 33.6% (fourth straight quarter of sequential margin decline excluding Q4 spike), as employee costs (+15.2% YoY) and other expenses (+15.6% YoY) outpaced revenue — partly from acquisition-related costs and wage-code adjustments; PAT jumped 27% YoY aided by higher other income (+55.8% YoY) and a 140bps YoY drop in effective tax rate to 29.2% (new Section 115BAA regime); standalone business grew only 2.5% YoY, highlighting reliance on subsidiaries for group growth; the Organon acquisition (shareholder approval received July 2026) adds execution risk and will weigh on finance costs going forward.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹15,299.88 Cr | 10.5% | -73.8% |
| EBIT | ₹4,402.57 Cr | 8.3% | |
| Net profit | ₹2,894.79 Cr | 27.0% | |
| EPS | ₹12.1 | 27.4% | |
| EBIT margin | 33.6% |
P&L walk
Revenue grew 10.5% YoY driven by global specialty and generic sales; EBITDA margin contracted 130bps YoY to 33.6% as employee cost and other expenses rose faster than revenue; PAT jumped 27% YoY aided by higher other income and lower effective tax rate post opting for new tax regime.
Segments
The company continues to operate as a single 'Pharmaceuticals' reporting segment; no geography split disclosed in this filing.
Key positives
- Revenue growth accelerating: +10.5% YoY vs +8.9% in Q4FY26 and +8.1% in Q3FY26.
- PAT growth of 27% YoY significantly outpacing revenue, aided by higher other income (+₹2,592 Cr YoY) and lower tax rate (29.2% vs 30.6%).
- Gross margin expanded 40bps YoY to 86.5%, with raw material cost as % of revenue declining 60bps to 12.9% — input cost tailwind is a tailwind for the second straight quarter.
- R&D spend as % of sales declined to 5.3% from 6.4% YoY, freeing up operating cash flow.
- EPS ₹12.1, +27.4% YoY, with no dilution (equity base unchanged).
- Management opted for Section 115BAA concessional tax regime, effective FY27, reducing tax burden.
Key concerns
- EBITDA margin contracted 130bps YoY to 33.6% despite gross margin expansion — employee costs (+15.2% YoY) and other expenses (+15.6% YoY) grew significantly faster than revenue.
- Finance costs surged 33.2% YoY to ₹997 Mn, reflecting debt taken for the Organon acquisition, which will increase interest burden in coming quarters.
- Acquisition-related exceptional charges of ₹1,670 Mn for Organon due diligence and legal costs weighed on reported operating profit; additional costs expected in subsequent quarters.
- Standalone revenue growth was a tepid 2.5% YoY, indicating domestic formulation growth is sluggish relative to the group's global business.
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