Sun Pharma delivers 26% profit growth, but margins disappoint the Street

Sun Pharmaceutical Industries shares fell on Friday even after the company reported a 26.2% year-on-year rise in consolidated net profit to ₹2,714 crore for the quarter ended March 2026. Investors appeared to focus more on margin pressure and slower EBITDA growth than on the strong bottom-line performance.

Consolidated revenue rose 12.8% to ₹14,612 crore from ₹12,959 crore a year earlier. EBITDA increased 6.4% to ₹3,954 crore from ₹3,716 crore, but the EBITDA margin slipped to 27.06% from 28.68%, down 162 basis points. The weaker margin trend appeared to offset the profit growth in market sentiment.

Margin pressure

The quarter showed a mixed operating picture. Revenue growth was healthy, but EBITDA growth lagged sales, which tends to matter in the pharma sector where operating efficiency is closely watched. The company also had exceptional items during the year, adding another layer of caution for investors assessing earnings quality.

Sun Pharma’s consolidated sales rose 13.6% year-on-year to ₹14,559.8 crore in the quarter, driven by India formulations and innovative medicines. India formulations grew 14.8% in the quarter, while innovative medicines sales rose 20.1% to $354 million. However, US formulations slipped 1.1% to $459 million, tempering the overall mood.

Business mix

The company said India formulations were led by CVD, CNS, gastro and ortho therapies, while innovative medicines benefited from both US and international markets. Sun Pharma also said the India business gained 0.3 percentage point in market share in FY26, which it described as the highest annual gain since the Ranbaxy acquisition.

That said, the weakness in US formulations and the margin squeeze likely limited investor enthusiasm despite the strong growth in profit.

Management commentary

In its earnings presentation, Sun Pharma said, “In Q4, India formulations recorded growth of 14.8%, led by CVD, CNS, Gastro & Ortho segments.” It also said, “Growth of 20.1% in Q4FY26, driven by both US & international markets,” referring to innovative medicines.

The company also flagged a strategic acquisition move, saying it has entered into a definitive agreement to acquire Organon in an all-cash transaction, a move it said should help accelerate its transformation into a leading global pharmaceutical company, subject to approvals and closing conditions.

The market reaction suggested that investors were not willing to reward profit growth alone. Softer EBITDA margins, slower operating profit growth and weakness in US formulations appeared to outweigh the strong headline numbers. The quarter was decent, but not strong enough to trigger a meaningful rerating.

Shares of Sun Pharma ended 2.71% lower at ₹1,840 apiece on the NSE on Friday. The stock has risen over 7% in the past year, outperforming the benchmark Nifty 50 index that has slipped nearly 4% during the same period.