What factors contributed to Sun Pharma’s increased profit margin in FY25!

Sun Pharma’s increased profit margin in FY25 was driven by several key factors:

• Shift Toward Specialty Drugs and Better Product Mix: Sun Pharma has been repositioning itself from primarily generic drugs to specialty drugs, which include complex formulations like biologics, injectables, and dermatology drugs. These specialty segments typically have higher margins due to less competition and greater pricing power. This shift led to improved product mix with higher domestic sales and specialty business contributions, which supported margin expansion to around 29% EBITDA margin in FY25.

• Robust Growth in Domestic Formulation Business: The India formulation segment grew strongly by 13.7%, driven largely by volume rather than price hikes, indicating strong market trust and penetration. This volume-led growth in a large, profitable domestic market boosted margins.

• Operational Efficiencies and Controlled Expenses: Improved operational performance, including better gross profit margins (gross profit margin up by about 259 basis points to nearly 80%) and controlled employee costs, enhanced profitability.

• Growth in Global Specialty Sales and Emerging Markets: The global specialty business showed continued momentum with nearly 20% of total revenues and healthy growth in emerging markets, which also tend to have better profitability profiles than traditional generics.

• Reduced Forex Losses and Exceptional Items Excluded: Reported net profit showed some volatility due to one-off restructuring charges and impairment related to US operations, but adjusted net profit grew steadily. Reduced forex losses also supported overall profitability improvements.

• Investments in R&D Focused on Specialty: Increasing allocation of R&D toward specialty drug development (from 24% to 38%) allowed Sun Pharma to build a sustainable specialty portfolio contributing to better margins and competitive advantage3.

In summary, Sun Pharma's profit margin expansion in FY25 was primarily due to a favorable product mix with greater emphasis on specialty and domestic formulations, operational efficiencies, and growth in high-margin markets, complemented by prudent cost management and reduced exceptional losses.

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