Accumulate Sun Pharma; target Rs 1026: Kotak Securities

Kotak Securities' report on Sun Pharmaceutical Industries

"Sun's revenues were lower than expected at Rs 42.8bn, flat YoY and down 10% QoQ. EBIDTA margins were in line with expectations at 44.9% led by better gross margins (at 85% vs. expectations of 83%). Though lower tax rate cushioned PAT, it was still below our expectations at Rs 14.3bn, down 7% YoY and 9.4% QoQ. Though the quarter was a miss, mngt has maintained its earlier guidance of 13-15% revenue growth. This would imply a ~28% growth in 4QFY15. Sun has also hinted that Halol plant regulatory issues are still ongoing and may take longer to resolve. We continue to believe that Halol plant issues will remain an overhang for the stock in near term. Over FY14-17E, we expect SUNP to post 17%/16% CAGR in revenues/APAT over FY14-17E. Margins are expected to taper off by 210bps as we expect pricing pressure to build in Sun's key products. We revise our FY15E EPS lower by 5.6% to factor lower than expected 3QFY15. We retain our Accumulate rating with a TP of Rs 1,026, 24x FY17E EPS and an NPV of Rs 70 (for Tildrakizumab)", says Kotak Securities research report.

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