Buy Sun Pharma; target of Rs 970: Motilal Oswal

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Motilal Oswal's research report on Sun Pharma

Sun Pharma (SUNP) delivered yet another robust quarterly performance, with the beat on margins led by Domestic Formulation (DF) / Emerging Markets (EM) and sustained momentum in global specialty sales. We raise our earnings estimate by 7%/3% for FY22E/FY23E, factoring in a) a continued ramp-up in the Ilumya-led Specialty portfolio, b) faster growth in non-COVID, Chronic therapy sales in DF, c) superior traction in Emerging Markets, and d) deferred R&D spending on specialty clinical trials. We continue to value SUNP at 25x 12M forward earnings to arrive at Target Price of INR970. We remain positive on SUNP’s a) increasing portfolio offerings in the Specialty segment, b) market share gains in the Branded Generics segment, and c) a healthy and steady pace of launches in US Generics (ex-Taro). Maintain Buy.

Outlook

Accordingly, we raise our Target Price to INR970 on a 25x 12M forward earnings basis. We remain positive on SUNP on a) a burgeoning global Specialty portfolio / Branded Generics across geographies and b) a robust ANDA pipeline to sustain the US Generics business despite severe price erosion. We maintain our Buy rating.

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