Reviews
In this edition, we have reviewed Sun Pharmaceutical Industries Ltd. and Axis Bank Ltd. We suggest our reader- investors to HOLD in Sun Pharmaceutical Industries Ltd. and Axis Bank Ltd.
We had recommended Sun Pharmaceutical Industries Ltd. in Volume 36, Issue No. 11, dated April 25, 2021 to May 09, 2021, under the ‘Cover Story’ segment. The recommended price for the stock was Rs646.05. We had recommended the stock on the basis of the company’s focus to maintain leadership in existing markets through innovative solutions and invest to further build the speciality pipeline. Sun Pharmaceutical Industries is the fourth-largest specialty generic pharmaceutical company in the world with global revenues of over USD 4.5 billion. The company is supported by more than 43 manufacturing facilities.
It provides high-quality, affordable medicines, trusted by healthcare professionals and patients, to across more than 100 countries. The financial performance of the company reveals that on a consolidated quarterly basis the net sales and other operating income was recorded at Rs9,625.93 crore in Q2FY22 as compared to Rs8,553.13 crore in Q2FY21, giving a rise of 12.54 per cent. The operating profited ascended 16.49 per cent from Rs2,449.06 crore in Q2FY21 to Rs2,852.83 crore in Q2FY22. The net profit for the quarter registered at Rs2,088.73 crore in Q2FY22 as as compared to net profit of Rs1,948.38 crore in Q2FY21. On the annual front, the net sales and operating income improved by 2.01 per cent from Rs32,837.50 crore in FY20 to Rs33,498.14 crore in FY21.
The operating profit of Rs7,625.74 crore of FY20 grew by 22.31 per cent to reach operating profit of Rs9,326.89 crore in FY21. FY21 reported a net profit of Rs2,284.68 crore in comparison to net profit of Rs4,186.79 crore reported in FY20. The constant growth in Sun Pharmaceutical Industries’ specialty portfolio over the past five quarters depicts its ability to grow this business further aided by ramp-up in key products, including the recently launched ‘Winlevi’ and normalisation of patient footfalls. Also, its robust balance- sheet with net cash position is likely to aid specialty spends and inorganic initiatives. The company has launched 28 products in Q2 and aims to outperform the Indian pharmaceutical market (IPM) over the coming quarters. Hence, we recommend HOLD.
We had recommended Axis Bank Ltd. in Volume 36, Issue No. 11, dated April 25, 2021 to May 09, 2021, under the ‘Cover Story’ segment. The recommended price for the stock was Rs669.35. We had recommended the stock on the basis of reporting by bank that it is witnessing significant value creation happening in subsidiaries from its ‘One Axis’ platform and its focus on reaching millions of unbanked and under-banked Indians. Axis Bank is the third-largest private sector bank in India. An entire spectrum of financial services to customer segments covering large and mid- corporates, MSME, agriculture and retail businesses is offered by the bank.
The company reported 86 per cent year-on-year (YoY) rise in net profit at Rs3,133 crore for the September quarter compared with Rs1,683 crore in the same quarter last year. This was the highest- ever quarterly profit for the bank. Net interest income (NII) for the bank grew 8 per cent YoY to Rs7,900 crore compared with Rs7,326 crore in the year-ago quarter. Net interest margin (NIM) for the Q2FY22 stood at 3.39 per cent. Its gross NPA ratio touched the lowest level in 20 quarters to 3.53 per cent for the period ended September 30, 2021. On an annual basis, NII grew 16 per cent on a YoY basis to Rs29,239 crore whereas the net interest margin (NIM) stood at 3.53 per cent, improving by 2 bps YoY.
The operating profit rose 10 per cent YoY to Rs25,702 crore while cost to assets were recorded at 1.96 per cent, improving 13 bps on a YoY basis. On the business front the bank has witnessed strong progress. The company continues to focus on SMEs and mid-corporate segments as well as the retail side as it sees better disbursements and growth driven by secured products. The bank has partnered with BharatPe to expand its merchant acquiring business and launched a wide range of open API (application programming interface) banking solutions, covering 200+ retail APIs and 51 corporate APIs. Hence, bearing an optimistic outlook for the coming quarters we recommend HOLD.
(Closing price as of Nov 15, 2021)