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Motilal Oswal Report
In this note, we explored the specialty pipeline of Sun Pharmaceutical Industries Ltd., examining products under development, the commercialised portfolio, and the competitive dynamics within each segment.
The overall research and development expenditure is expected to increase by 33% YoY in FY24 and maintain an 18% CAGR over FY24-26 to support clinical development of certain assets.
Despite some delays in the clinical trial processes of Ilumya (additional indication), MM-II, and GL0034, the innovative/discovery pipeline continues to be the most promising within the India listed space.
Sun Pharma has consistently outperformed the industry in the domestic formulation segment for five years now. The growth is largely driven by better volume off-take. Sun Pharma has been aggressive in new launches as well. However, these efforts have not yet translated into improved growth prospects.
Despite regulatory issues at its key sites Halol/Mohali/Dadra and ongoing price erosion, Sun Pharma has been able to sustain the sales run-rate of US generics segment on the back of new launches.
We are factoring 19% earnings compound annual growth rate over FY24-26 on the back of 12%/13% sales CAGR in DF/EMs, 18% sales CAGR in specialty portfolio, and 18% CAGR in R&D spent.
We value Sun Pharma at 30 times 12 months forward earnings to arrive at a target price of Rs 1,870. We remain positive on Sun Pharma on the back of-
building robust brand franchise in developed market and
superior execution in the DF segment.
Maintain Buy.
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