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Dolat Capital Report
Sun Pharmaceutical Industries Ltd.'s Q2 FY24 result was largely in line with our estimates, however profit after tax was above estimate on account of higher than expected other income and lower than expected interest, depreciation and tax rate.
Sun Pharma's revenues were at Rs 121.9 billion (in line) grew by 11.3%/2.1% YoY/QoQ aided by strong India and rest of world sales offset by lower U.S. sales.
Ebitda margin was in line (-284 basis points/-153 bps YoY/QoQ). Other expenses was higher than expected offset by lower than expected research and development and staff cost.
Valuation
We expect revenue/profit after tax compound annual growth rate of 11%/15% over FY23-26E driven by strong domestic business, ramp up in specialty segment, gRevlimid contribution to offset U.S. generic erosion impacted by compliance challenges.
We roll over our valuation to FY26 and maintain our 'Buy' rating with a revised target price of Rs 1,430 at 26 times FY26E earnings per share.
Key risks are higher-than-expected price erosion in the U.S., escalation of regulatory issues on plants.
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