Sun Pharma's margin recovers sequentially but remains below year-ago level
Revenue grew 10.46% year on year, but expenses rose 13.95%; other income contributed 12.47% of pre-tax profit.
Filed 31 Jul 2026, 18:24 IST · after market close · Sun Pharmaceutical Industries Ltd (SUNPHARMA)
Key takeaways
- Consolidated revenue grew 10.46% year on year, but expenses rose 13.95%, reducing operating margin by 2.19 percentage points to 28.87%.
- Quarter on quarter, operating margin recovered 1.81 percentage points as revenue growth of 4.71% outpaced expense growth of 2.11%, despite a 5.65-percentage-point rise in the tax rate.
- Net profit grew 26.53% year on year, but other income accounted for 12.47% of pre-tax profit, making earnings quality an important consideration.
Price around the results
Revenue momentum improved, but annual cost pressure persists
Sun Pharma's consolidated revenue increased 4.71% sequentially, while expenses grew 2.11%, supporting an operating profit recovery of 11.72%. The annual comparison is less favourable: expenses grew 13.95% against revenue growth of 10.46%, which narrowed operating margin by 2.19 percentage points. Operating margin remains above the Healthcare peer median by 2.82 percentage points across 23 reported companies.
Profit growth included a sizeable non-operating contribution
Net profit rose 26.53% year on year, ahead of the 2.70% increase in operating profit. Other income contributed 12.47% of pre-tax profit, while interest expense increased 33.25% year on year. Sequentially, the tax rate rose 5.65 percentage points and interest expense increased 16.04%, limiting the benefit from the operating recovery.
Margin direction is a recovery from Q4, not a return to last year's level
Operating margin fell from 31.88% in Q3FY26 to 27.06% in Q4FY26 before recovering to 28.87% in Q1FY27. It is still 2.19 percentage points below Q1FY26, when expenses grew faster than revenue. The sequential improvement therefore reflects a reversal of the Q4 decline rather than a full restoration of the earlier margin range.
Expansion plans broaden the portfolio
The presentation said Sun Pharma announced the acquisition of Organon & Co. to expand global scale and add women's health and biosimilars. It also said the company has five new active substances in development and acquired Concert Pharmaceuticals for access to deuruxolitinib for alopecia areata. These initiatives add to the launches of Leqselvi and Unloxcyt reported for FY26.
No immediate market response; past reactions have skewed negative
The results were filed after market close, so there was no immediate stock reaction to assess. After the previous eight results, the stock fell six times and rose twice, with a median absolute move of 1.64%. The historical pattern has therefore been more often negative than positive, but the typical move has been limited in size.
Q1FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹15,300 cr | ₹14,612 cr | +4.71% | +10.46% |
| Other income | ₹510 cr | ₹444 cr | +14.74% | — |
| Expenses | ₹10,882 cr | ₹10,658 cr | +2.11% | +13.95% |
| Operating profit | ₹4,418 cr | ₹3,954 cr | +11.72% | +2.70% |
| Operating margin (%) | 28.87% | 27.06% | — | — |
| Interest | ₹100 cr | ₹86 cr | +16.04% | +33.25% |
| Depreciation | ₹739 cr | ₹775 cr | -4.74% | +5.45% |
| Profit before tax | ₹4,089 cr | ₹3,537 cr | +15.60% | +29.28% |
| Tax | ₹1,188 cr | ₹828 cr | +43.55% | +36.53% |
| Net profit | ₹2,901 cr | ₹2,710 cr | +7.07% | +26.53% |
| EPS (₹) | ₹12.10 | ₹11.30 | +7.08% | +27.37% |
Operating margin of 28.87% compares with a Healthcare sector median of 26.05% across 23 peers that have reported Q1FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
Expansion
- Sun Pharma announced the acquisition of Organon & Co. to enhance global scale and add women's health and biosimilars.
New products
- Sun Pharma launched Leqselvi and Unloxcyt in FY26.
- Sun Pharma launched Sezaby in the US in FY23.
New initiatives
- Sun Pharma has a pipeline of five new active substances in development.
- Sun Pharma acquired Concert Pharmaceuticals to access deuruxolitinib for alopecia areata.
Problems & risks
- Sun Pharma reported an additional Rs 6.444 billion provision related to GxMDL in FY26.
- Sun Pharma reported a Rs 3.755 billion provision related to the wage code in FY26.
- Sun Pharma reported a Rs 2.876 billion impairment cost for SCD 044 in FY26.
What to watch
- Whether operating margin holds above 28.87% after the 1.81-percentage-point sequential recovery.
- Whether expense growth remains below revenue growth, following 2.11% versus 4.71% sequentially.
- The share of pre-tax profit contributed by other income after its 12.47% contribution this quarter.