Sun Pharma Q4 Results Review - The U.S., India Businesses Drive Earnings Growth: Motilal Oswal

Motilal Oswal Report

Sun Pharmaceutical Industries Ltd. reported a slight miss at the operational level for Q4 FY24. This was due to lower-than-expected sales in the rest of world market and higher-than-expected opex for the quarter.

Sun Pharma has surpassed $1 billion sales in the global specialty segment in FY24 versus $430 million in FY20. This was backed by enhanced efforts towards product offerings/marketing activities in the regulated markets.  We retain our FY25/FY26 estimates.

We value Sun Pharma at 30 times 12 months forward earnings to arrive at our target price of Rs 1,810. We expect an 18% earnings compound annual growth rate over FY24-26, driven by 12-13% sales CAGR in the domestic formulation/emerging market/ROW markets, 9% sales CAGR in the U.S. market, and 220 bp margin expansion.

Sun Pharma continues to work on enhancing its specialty pipeline in the areas of dermatology, ophthalmology, and onco-dermatology. In fact, the target action date of July 2024 is the key near-term trigger with respect to Deuruxolitinib.

Sun Pharma has also consistently outperformed the branded generics markets, which provides a healthy visibility for better earnings prospects. Reiterate Buy.

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