Shares of Sun Pharmaceutical Industries Ltd. gained as most analysts reiterated 'buy' on the drugmaker citing growth in branded formulations in India and emerging markets, ramp up of specialty portfolio and new drug applications in the U.S. generics market, among others.
India's largest pharma company saw its third-quarter profit rise 11% over the year earlier, beating estimates, as sales across key markets and of bulk drugs grew. Its revenue and operating profit also increased year-on-year, and margin remained steady.
The company's global specialty portfolio sales grew 21% year-on-year in the quarter ended December.
Shares of Sun Pharma gained as much as 5.43% as of 11 a.m. on Tuesday. Of the 39 analysts tracking the drugmaker, 34 have a 'buy' rating, three suggest a 'hold' and two recommend a 'sell', according to Blommberg data. The 12-month consensus price target implies an upside of 9.9%.
Here's what brokerages have to say about Sun Pharma's Q3 results:
Motilal Oswal
Maintains 'buy' with a target price of Rs 1,000 apiece, implying an upside of 20%.
Q3 FY22 performance was operationally better than estimates, driven by branded generics and the U.S. (excluding Taro) segments.
The brokerage is positive on Sun Pharma on the back of:
a) superior execution in its specialty portfolio,
b) better-than-industry growth in the branded generics market of domestic formulation as well as other emerging markets,
c) robust pace of ANDA launches in the U.S. generics market,
d) delayed R&D spend in the specialty portfolio,
e) market share gain/launches in the branded segment of emerging/RoW markets, and
f) better operating leverage.
It has a net cash of $200 billion (Rs 15,000 crore), implying funds at its disposal for inorganic growth.
The management said that on an average, the launch rate in the U.S. has been five-six ANDAs per quarter, driving steady growth in the U.S. generics business.
Despite the patient-doctor-medical representative connect in the U.S. being affected due to the Covid-19 outbreak, Sun Pharma has been able to garner healthy sales growth in the specialty portfolio.
It hasn't received any feedback from the U.S. FDA on re-inspection of its Halol facility.
Branded formulation business accounts for 50% of revenue, said the management.
Prabhudas Lilladher
Maintains 'buy', hikes target price to Rs 1,050 from Rs 1,000 apiece, implying an upside of 26%.
The company reported growth across markets aided by:
1) specialty ramp-up across the globe,
2) focus on domestic market, and
3) steady growth across ROW market
Sustained momentum in specialty will help in improving operating leverage and margins.
Domestic formulations (32% of total revenue) continue to outperform Indian pharmaceutical market.
The management said that they received better-than-expected response for Winlevi (to treat acne) since its launch in the U.S. market (with 80% of doctors' acceptance).
Uptick in non-Covid treatment has resulted in higher growth of chronic and sub-chronic segments amongst domestic formulation.
Slower patients' recruitments resulted in lower trials and thereby R&D cost. Expects R&D cost to inch up.
Ex-Taro company remains net cash to the tune of $767 million (Rs 5,700 crore).
Sun Pharma remains the brokerage's top pick in large-cap space.
Nirmal Bang
Maintains 'buy' with a target price of Rs 1,035 apiece, implying an upside of 24%.
Q3 FY22 revenue and Ebidta was broadly in line with estimate.
But net profit was ahead of our estimate, led by higher other income, lower interest cost and lower than expected tax rate.
Other income for Q3 was higher compared to Q2 mainly due to settlement income ($22.5 million) from DUSA Biofrontera litigation and interest on income tax refund.
Traction in the specialty portfolio should continue going forward
led by Winlevi.
Subsequent quarters should also see contribution from recent approval for gAmbisome (fights infections caused by fungus) which has received competitive generic therapy designation.
The brokerage revised specialty sales estimates to consider the strong ramp up seen in Winlevi prescriptions and above expected growth in domestic markets.
Sun Pharma is targeting specialty products that are in the market or close to market for its specialty portfolio.
The company is looking at making an acquisition in the next one-two years.
Emkay Global
Maintains 'hold' with a target price of Rs 805 apiece, implying a downside of 3.5%.
The current valuations limit the upside potential in view of near-term headwinds, such as
1) potential softness in specialty sales in Q4,
2) potential increase in R&D, and
3) the absence of covid-related and seasonal sales.
Global specialty sales grew driven by Ilumya (moderate to severe plaque psoriasis), Cequa (dry eye), Levulan (warty overgrowths of skin) and Absorica (severe cystic acne).
This specialty growth had some seasonal effects due to high demand for derma products in winter.
Winlevi is yet to contribute materially, which is expected in Q4.
On the generic front, the company will launch gAmbisome with 180 days of exclusivity, which should help generic sales.
Other expenses have normalised as travelling activities have resumed.
Specialty sales are expected to be softer in Q4 as seasonality wanes.
Upside risks: higher-than-expected growth in businesses and Halol plant resolution.
Downside risks: lower-than-expected growth in specialty, adverse regulatory actions, and higher price erosion in the US.
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