Buy Sun Pharmaceutical Industries; target of Rs 675: ICICI Direct

ICICI Direct's research report on Sun Pharmaceutical Industries

Q3 revenues grew 8.4% YoY to Rs 8837 crore (I-direct estimate: Rs 8636 crore). US formulations grew 10.8% YoY to Rs 2761 crore. Indian formulations grew 9.4% YoY to Rs 2753 crore. Emerging markets business grew 8.4% YoY to Rs 1507 crore. RoW markets business grew 15.6% YoY to Rs 1276 crore. API segment de-grew 9.4% YoY to Rs 485 crore. EBITDA margins expanded 465 bps YoY to 27.2% (I-direct estimate: 23.0%) due to lower other expenditure and better gross margins. Delta vis-à-vis I-direct estimates was mainly due to significantly lower other expenditure. EBITDA grew 30.7% YoY to Rs 2406 crore (I-direct estimate: Rs 1986 crore). PAT more than doubled to Rs 1852 crore (I-direct estimate: Rs 1319 crore) vs. Rs 914 crore in Q3FY20. Delta vis-a-vis EBITDA was due to higher other income, lower interest expense and lower tax rate.

Outlook

We maintain BUY and arrive at our new target price of Rs 675 (vs. earlier Rs 585) based on 25x FY23E EPS of Rs 27.0.