Sunpharma vs Apollohosp Q1 FY25

Sun Pharma reported a solid Q1 FY25 with consolidated sales of INR 12,524.5 crore (+6.3% YoY) and EBITDA margin expansion of 60 bps to 28.5%. PAT surged 40.2% YoY to INR 2,835.6 crore, aided by lower base and operational leverage. India formulation grew 16.4% YoY to INR 4,144.5 crore, gaining market share to 8.6%. U.S. sales were flat at $466M, with specialty up 14.7% to $266M, driven by Ilumya and other products. Key highlight was FDA approval of Leqselvi for alopecia areata, though a preliminary injunction motion by Incyte may delay launch. Management guided for higher R&D spend in subsequent quarters (8-10% of sales) and expects tax rate to normalize. Risk: Leqselvi launch uncertainty due to litigation could impact near-term specialty growth.

Guidance read

R&D spend to step up to 8-10% of sales for FY25: Management expects R&D investment to increase in subsequent quarters, with full-year guidance of 8-10% of sales. Effective tax rate to increase on full-year basis: Tax rate expected to rise due to expiry of certain exemptions; should be viewed on an annualized basis. Leqselvi launch pending court decision on preliminary injunction: Launch timing of Leqselvi will be governed by court ruling on Incyte's motion; company opposes and seeks early outcome.

Risk read

Key risks include Leqselvi launch delay due to litigation — Incyte filed a preliminary injunction motion to block Leqselvi launch; outcome uncertain and could delay revenue contribution.; Halol plant re-audit timeline uncertain — Management plans to request FDA re-audit once ready, but no specific timeline provided; pending approvals may impact U.S. generic pipeline.; U.S. generic revenue flat despite Revlimid contribution — U.S. generic sales were flat sequentially; Revlimid contribution was not large this quarter, and sustainability is uncertain..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Apollo Hospitals delivered a strong Q1 FY25 with consolidated revenue of INR 5,086 crore (+15% YoY) and EBITDA of INR 675 crore (+33% YoY). PAT surged 83% YoY to INR 305 crore. The hospital business saw inpatient volumes grow 11% YoY and occupancy rise 600bps to 68%, driven by insurance penetration (now 47% of revenue) and medical team expansion (102 doctors added). Apollo HealthCo reported positive EBITDA of INR 23 crore, with 24/7 digital losses narrowing to INR 97 crore. Management guided for 100bps margin expansion in hospitals over 3-4 quarters and 24/7 breakeven in 6-7 quarters. Risk: slower-than-expected ARPOB recovery due to higher medical case mix and potential disruption from Bangladesh political situation (2% of revenue).

Guidance read

Hospital margin expansion of 100bps over 3-4 quarters: Management expects healthcare services EBITDA margin to expand by 100 basis points over the next 3-4 quarters, driven by volume growth, case mix improvement, and cost optimization. ARPOB growth of 7% for FY25: Management guided for ARPOB increase of 7% for the full year, supported by tariff revision of 4%, better case mix, and international patient recovery. Apollo 24/7 digital breakeven in 6-7 quarters: The digital segment is on track to achieve breakeven within the next six to seven quarters, supported by GMV growth and cost control. 500-550 new pharmacy stores in FY25: Apollo HealthCo plans to add 500-550 new offline pharmacy stores in FY25, with Q1 impacted by election delays but pace expected to pick up.

Risk read

Key risks include Bangladesh political situation impacting international patients — Bangladesh contributes ~30% of international patient revenue (2% of total revenue). Recent political issues have caused a drop in volumes, though management expects recovery.; Slower ARPOB recovery due to higher medical case mix — ARPOB grew only 2% YoY due to a higher proportion of medical admissions. Management expects improvement but there is risk if surgical volumes do not pick up as anticipated.; New hospital bed additions may pressure margins — Operationalization of four new hospitals (1,500 beds) over next five quarters could reduce EBITDA margins by 100-150bps from FY25 exit levels..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.