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Taro reports 11% decline in sales, profit jumps due to forex income

Taro’s result, while weak shows that gross margin performance has improved than Q3FY18.

Sun Pharma’s subsidiary, Taro Pharma has reported 10.8% yoy decline in its sales to $175.2mn in Q4FY18. Taro said that the decline was due to the continuing increased competition and the challenging pricing environment in the US. The company, however, said that it witnessed increase in overall volumes.

Gross profit for Q4FY18 declined by 17.3% yoy to $118.9mn. Gross margin declined by 535bps yoy to 67.9% in Q4FY18 reflecting the pricing pressure despite the volume growth.

Operating profit for the quarter declined by 26.5% yoy to $74.8mn. Operating margins declined by 909bps yoy to 42.7%. R&D cost grew by 2.2% yoy to $20.3mn. As % of sales, R&D cost was at 11.6% in Q4FY18 vs. 10.1% in Q4FY17. Selling, marketing, general and administrative expenses increased by 7.1% yoy to $23.8mn.

During Q4FY18, company reported forex income of $16.0mn vs. forex expense of $5.8mn. Adjusted for this, company at the PAT level reported 23.5% yoy decline to $81.2mn in Q4FY18. Tax expense decreased 38.2% yoy to $10.7mn resulting in an effective tax rate of 11% in Q4FY18 vs. 17.3% in Q4FY17.

Due to the forex income and lower tax expenses, Taro’s profit after tax grew by 4.2% to $86.5mn.

Taro’s sales in the Q3FY18 had declined by 29.5% yoy while gross margin had declined by 973bps yoy to 66.2%. The Q4FY18 result highlights a smaller decline in sales and gross margins.