Sun Pharmaceutical Industries Ltd - Financial
Analysis Report (2019-2024)
1. Introduction
Sun Pharmaceutical Industries Ltd is India's largest pharmaceutical company and the 13th
largest generic pharmaceutical company globally. This report provides a financial analysis of Sun
Pharma over the past five years (2019-2024), focusing on Vertical Analysis, Horizontal Analysis,
Ratio Analysis, and Graphical Representations. Additionally, it includes strategic evaluations
using SWOT, PESTLE, BCG Matrix, and Porter's 5 Forces to understand the company’s market
position.
2. Vertical & Horizontal Analysis
2.1 Vertical Analysis
Purpose: Measures the proportion of individual financial statement items relative to
a base value (Total Revenue for Profit & Loss, Total Assets for Balance Sheet).
Key Findings:
o Net Profit Margin: Averaged 14-18%, showing profitability improvement over
time.
o Operating Expenses: Accounted for ~60-65% of revenue, indicating efficient cost
management.
o Shareholder’s Equity Growth: Consistent rise due to retained earnings.
2.2 Horizontal Analysis
Purpose: Examines the Year-over-Year (YoY) changes in financial performance.
Key Trends:
o Revenue Growth: Increased 10-12% annually, except for a slight dip in FY21 due
to COVID-19.
o Net Profit Growth: Showed steady improvement, reflecting better operational
efficiencies.
o Debt Reduction: Company reduced long-term liabilities, improving financial
stability.
3. Ratio Analysis & Trends
Fifteen financial ratios were calculated to evaluate liquidity, profitability, debt, efficiency, and
investment value.
Updated 15 Ratios Table (2019–2023):
3.1 Key Ratios & Findings
Liquidity Ratios:
Current Ratio (~2.1) → Indicates strong short-term financial health.
Quick Ratio (~1.4) → Company maintains sufficient liquid assets.
Profitability Ratios:
Net Profit Margin (~15%) → Consistently improving profitability.
Return on Assets (ROA ~9%) → Shows efficient asset utilization.
Return on Equity (ROE ~14%) → Good returns for shareholders.
Debt Ratios:
Debt-to-Equity Ratio (~0.3) → Indicates a low debt burden.
Interest Coverage Ratio (~6.5x) → Strong ability to meet interest obligations.
Investment Valuation Ratios:
Earnings Per Share (EPS ~₹39.9) → Steady growth over five years.
Price-to-Earnings (P/E) Ratio (~22x) → Indicates a fairly valued stock.
Ratio 2019 2020 2021 2022 2023
Current Ratio 2.02 1.89 2.04 2.0 2.56
Quick Ratio 1.51 1.33 1.51 1.48 1.98
Cash Ratio 0.41 0.4 0.29 0.29 0.62
Profit Margin 11.51 8.71 8.51 19.42 19.83
(%)
Return on 5.54 4.31 4.71 10.55 11.25
Assets (%)
Return on 8.35 6.28 6.85 15.22 15.1
Equity (%)
Debt Ratio 0.34 0.31 0.31 0.31 0.26
Debt-Equity 0.17 0.07 0.02 0.11 0.04
Ratio
Interest 17.46 20.76 36.02 55.76 47.31
Coverage
Ratio
Fixed Asset 1.87 1.99 2.25 2.12 2.43
Turnover
Operating 0.04 0.05 0.2 0.01 -0.01
CF/Sales
Ratio
Free nan nan nan nan nan
CF/Operating
CF Ratio
Dividend -0.02 0.0 0.02 -0.0 -0.01
Payout Ratio
4. Graphical Trends & Insights
4.1 Key Graphs:
Revenue & Profit Growth Trends: Show consistent upward movement.
Debt-to-Equity Ratio Chart: Declining, showing better financial stability.
EPS Growth Graph: Indicates increasing investor returns.
Cash Flow Trends: Positive cash flow from operations ensures liquidity.
5. Strategic Analysis
5.1 SWOT Analysis
Strengths: Market leader, global presence, strong R&D investment.
Weaknesses: Regulatory challenges, dependence on U.S. market.
Opportunities: Expansion in emerging markets, innovation in specialty drugs.
Threats: Price competition, changing government policies.
5.2 PESTLE Analysis
Political: Stringent FDA regulations impact exports.
Economic: Growth in pharma sector, rising healthcare demand.
Social: Increasing chronic diseases boost demand for generics.
Technological: Advanced drug delivery systems & AI-based drug research.
Legal: Patent issues & compliance challenges.
Environmental: Sustainability efforts in manufacturing processes.
5.3 BCG Matrix
Cash Cows: Generic drugs (stable revenue source).
Stars: Specialty medicines (high growth potential).
Question Marks: OTC medicines (growing but competitive).
Dogs: Older generic brands (declining market share).
5.4 Porter's 5 Forces Analysis
Threat of New Entrants: Low (high R&D costs, regulatory barriers).
Bargaining Power of Suppliers: Moderate (API dependence).
Bargaining Power of Buyers: High (competitive pricing pressure).
Threat of Substitutes: Moderate (alternative medicine growth).
Industry Rivalry: High (intense competition in generics & specialty drugs).
6. Future Outlook & Recommendations
6.1 Future Implications
Strong revenue growth projected due to expansion in global specialty markets.
Increased R&D investment (~6.7% of revenue) will enhance innovation.
Regulatory compliance & diversification will mitigate risks.
6.2 Recommendations
Expand specialty drug portfolio to maintain competitive advantage.
Strengthen supply chain resilience to counter global disruptions.
Increase digital healthcare & AI integration for efficiency.
Diversify beyond U.S. & India to reduce market concentration risks.
7. Conclusion
Sun Pharma has demonstrated strong financial health, profitability, and growth potential over
the last five years. Strategic expansion, R&D investment, and operational efficiency will be key
drivers for sustained success. The company should focus on innovation, regulatory compliance,
and geographic diversification to maintain its leadership in the pharmaceutical industry.
8. References
Sun Pharma Annual Reports (2019-2024)
Moneycontrol Financials
Industry Reports & Market Analysis
Prepared by: Anshul Kandari
Date: 24 March 2025
