HDFC Securities is bullish on Sun Pharma has recommended buy rating on the stock with a target price of Rs 670 in its research report dated November 14, 2018.
HDFC Securities' research report on Sun Pharma
With the provision for Modafinil litigation liability to the tune of Rs 12bn, Sun Pharma (SUNP) reported a loss of Rs 2.2bn in 2QFY19. However, adjusted PAT at Rs 9.96bn was still 8% below our estimates due to a similar miss on top line. The inventory correction exercise resulted into a 16% fall in India revenues, along with slower than expected growth in the US (up 21%YoY) which led to 4%YoY revenue growth in 2QFY19 (8% miss). However, EBITDA margin remained flat QoQ at 22.1% as better product mix and favorable currency boosted gross margin to 74% despite a spike in other expenses on account of the specialty business.
Outlook
At CMP the stock is trading at 33.6x FY19E and 25.4x FY20E EPS, a ~15% premium to peers. With a significant part of revenues expected to come in from the branded business in 3-4 years, we believe the stock is likely to continue trading at a premium. An 8% miss on top line has led us to cut our estimates by ~3% for FY19-20E. Maintain BUY rating with a TP of Rs 670 (25x Sep’20E + Rs 40/sh option value for specialty).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More
