Hold Sun Pharma; target of Rs 720: Emkay Global Financial

Emkay Global Financial recommended hold rating on Sun Pharma with a target price of Rs 720 in its research report dated May 28, 2021.

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Emkay Global Financial’s report on Sun Pharma

Q4 revenue of Rs85.2bn was largely in line with our estimates. EBITDA came in at Rs20.6bn, marginally missing our estimates by 3%. EBITDA margin of 24.2% came in line with our estimate. Adj. PAT of Rs13.4bn was also in line. Global specialty revenue of US$ 139mn in Q4 was in line with our expectations. Global Ilumya sales of US$ 143mn for FY21 puts Q4 Ilumya sales at ~US$ 45-47mn, a tad lower than expectations. The qoq softness was attributed to seasonally higher sales in Q3. We largely maintain FY22/23 estimates. We expect yoy margin compression in FY22 due to an increase in promotional and R&D expenses. We introduce FY24 estimates with revenue, EBITDA and EPS of Rs440bn, Rs120bn and Rs35, respectively.

Outlook

We downgrade Sun Pharma to Hold as we believe current valuations amply captures all the upside related to specialty. The stock is trading at 1-year fwd PE of 28x. We value it at 24x PE on our FY23E EPS and add SCD044 NPV of Rs15 to arrive at a TP of Rs720 (Rs660 earlier).

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