Sunpharma vs Apollohosp Q3 FY24

Sun Pharma reported Q3 FY24 consolidated revenue of INR 12,157 crore, up 9.5% YoY, driven by strong specialty sales (up 26.1% to $296M) and India formulation growth of 11.4%. EBITDA margin expanded 140bps to 28.1%, aided by better product mix and lower material costs. Adjusted PAT grew 19.7% to INR 2,594 crore. U.S. specialty continued to perform well, though generic business remained flattish due to Halol/Mohali plant issues. Management highlighted a healthy pipeline, including Nidlegy filing in Europe and Phase II/III starts for MM-II and GL0034 in H2 2024. The Taro merger at $43/share offers strategic benefits. Key risk: ongoing regulatory challenges at Mohali plant may delay generic supply recovery.

Guidance read

R&D spend to touch lower end of 7% guidance for FY24: Management indicated that R&D spend for the full year is expected to reach the lower end of the 7% of sales guidance. Phase II/III trials for MM-II and GL0034 to start in H2 2024: Phase III for MM-II and Phase II for GL0034, initially expected early 2024, are now slated to begin in the second half of 2024. Nidlegy filing with European authorities in H1 2024: Partner product Nidlegy is expected to be filed with European authorities during the first half of 2024.

Risk read

Key risks include Mohali plant supply constraints persist — Supplies from Mohali plant are not normal; issues with product prioritization and quality clearances are causing delays.; CEQUA facing increased competition in dry eye space — CEQUA's market share has declined due to generic Restasis and new entrants with different mechanisms of action.; Red Sea supply chain disruption risk — Management is monitoring the Red Sea situation; potential for shipment delays if situation does not normalize.; Taro merger may not receive minority approval — The $43/share offer requires approval from Taro's minority shareholders; failure could derail the merger..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

Apollo Hospitals reported a strong Q3 FY24 with consolidated revenue of INR 4,851 crore (+14% YoY) and EBITDA of INR 614 crore (+21% YoY). PAT surged 56% YoY to INR 245 crore, driven by robust healthcare services growth (12% YoY) and a significant milestone: Apollo HealthCo achieved break-even a quarter early. Hospital occupancy stood at 66%, with ARPOB up 10% to INR 56,368. Management guided for 200 bps margin improvement in healthcare services over the next few quarters, supported by volume growth and cost rationalization. The 24/7 digital platform is expected to break even in 6-8 quarters, with new revenue streams like insurance distribution and digital therapeutics. A 2,000-bed expansion plan over four years is underway. Key risk: new bed additions may temporarily pressure margins if ramp-up is slower than expected.

Guidance read

Healthcare services revenue growth of 15% for FY24: Management expects 15% revenue growth for the full year, with Q3 impacted by seasonality but confident of achieving at least 14%. 200 bps margin improvement in healthcare services over next few quarters: Internal target to increase EBITDA margins by 200 basis points through volume growth, clinical program expansion, and cost rationalization. Apollo 24/7 break-even in 6-8 quarters: Digital platform expected to achieve profitability within six to eight quarters, driven by new verticals like insurance distribution and digital therapeutics. 2,000 beds over four years at INR 3,000 crore capex: Expansion plan includes new hospitals in Pune, Hyderabad, Kolkata, and brownfield in Bangalore, with first beds operational in FY25.

Risk read

Key risks include Margin pressure from new bed additions — New hospitals in Pune, Hyderabad, and Kolkata may initially drag margins due to ramp-up costs, though management expects minimal impact.; Seasonality and one-off events impacting growth — Q3 saw lower elective surgeries due to holidays and Chennai cyclone, affecting revenue mix and margins. Similar events could recur.; Slowdown in 24/7 daily active users — Despite adding 2 million new users, daily active users declined sequentially, raising concerns about user engagement and monetization.; Regulatory risk from kidney racket allegations — Allegations of involvement in a kidney racket could impact reputation, though management states no negative findings have been made..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.