Sun Pharma Q2 Preview: PAT could rise 2% YoY; Leqselvi expenses put pressure on margins

Sun Pharma is expected to show steady but moderate growth in its September second quarter (Q2 FY26) earnings, with analysts highlighting a combination of factors: a high base effect from last year’s Revlimid sales, weak performance at Taro and early-stage spending on the US launch of Leqselvi, the recently approved specialty drug.According to average broker estimates, revenue is expected to rise around 7% year-on-year, while EBITDA could rise around 9%, supported by strength in the domestic and specialty segments. Profit after tax (PAT) is expected to grow only around 2% year-on-year as higher marketing and R&D costs weigh on margins.

Weak Taro quarter, limited boost from Leqselvi

Analysts expect a weak quarter for Taro, Sun’s US-based subsidiary, as the company faces pricing pressure and a strong year-over-year base, including significant contributions from Revlimid. Sequential growth in the US market is likely to remain modest at around 3%.Brokerage YES Securities noted that investors should focus on the company’s spending on Leqselvi this quarter and the size of the margin impact. Since the product has only recently been launched in the US, the contribution to sales is expected to remain small for the time being.

Specialty and domestic segments will lead the growth

Brokers agree that Sun Pharma’s global specialty business will remain a bright spot this quarter. Kotak Institutional Equities expects the specialty portfolio to show 15% year-on-year growth to approximately USD 330 million, driven by key products such as Ilumya, Cequa, Winlevi and Odomzo.

Similarly, Motilal Oswal estimates specialty revenue at $326 million, up 14% year-on-year, with healthy prescription growth and early growth in new launches. The brokerage also expects progress with Unloxcyt, another specialty drug in the pipeline.

Nationally, growth is expected to remain robust, with Sun’s Indian Formulation (DF) business likely to post 9-12% year-on-year growth, aided by new product launches, improved field productivity and higher prescription demand. Nuvama Equities expects 10% year-on-year growth in the domestic sector, noting that Sun continues to outperform the broader Indian pharmaceutical market.

Margins will come under pressure in the short term

While revenue growth appears stable, profitability may come under mild pressure due to higher R&D and commercialization costs. Kotak Equities expects EBITDA margin of 27.4%, down 130 basis points (bps) year-over-year and 200 basis points sequentially, as the company invests heavily in the US rollout of Leqselvi and other specialized marketing efforts.

Gross margins are expected to decline 90 basis points quarter-on-quarter to 78.8%, while R&D expenses could rise to 6.5% of sales, compared to 5.5% last quarter.

However, Nuvama has a slightly more positive view, expecting EBITDA margin growth of 70 basis points year-on-year to 30.4%, supported by a strong product mix, stable pricing and operating leverage from higher domestic volumes.

Overall, analysts agree that short-term margin pressure is a trade-off for long-term value creation as Sun continues to invest in scaling its global specialty pipeline.

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Important monitorables

Investors will pay close attention to updates on Leqselvi’s commercial performance, prescribed growth for Ilumya and Cequa, and any commentary on US price dynamics following the latest rate announcements. Another area to monitor is progress in the company’s specialized R&D pipeline, particularly the preparation for the launch of Unloxcyt and expansion into newer therapeutic areas.

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