Accumulate Sun Pharma; target of Rs 910: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's report on Sun Pharmaceutical Industries
"Sun Pharma result was in line with our estimates. Total revenues stood at Rs. 6758Crs showed single digit growth of 6.6% YoY on account of slowdown in US business due to temporary supply constraints at its Halol plant & competitive pressure on some of the products. However on QoQ basis, US sales improved due to broad based growth including improving supplies at Halol plant. Taro posted sales of USD 215mn, showed growth of 65% YoY. Last year’s quarter net sales of Taro were negatively impacted by USD 79mn provision for price protection (current quarter’s price protection provision was USD 14mn). On a pro-forma basis, adjusted for the price protection provisions, the net sales increase would have been 10%. Other operating income was high during the quarter as it includes proceeds from brand divestments as mandated by various competition authorities pertaining to Ranbaxy acquisition. EBITDA degrew by 4.6% YoY to Rs. 1850Crs & margins were at 27.4% contracted by 320bps due to onetime charges  related to restructuring and other write offs. Excluding these charges operating margin would have been 300bps above the current level. Management highlighted that some of expenses related to integration & cost related to clinical development of Tildrakizumab will continue in subsequent quarters. Reported PAT stood at Rs. 479Crs degrew by 60% YoY impacted by exceptional charges of Rs 685Crs related to impairment of fixed assets & goodwill and other related cost arisen on account of integration & optimization measures. Adjusting this, APAT stood at Rs 1164Crs down by 19.3% YoY. EPS for the quarter stood at Rs. 4.8."

Valuation:"We believe Ranbaxy’s consolidation initiatives will have an impact in near term but it will generate synergies in long term. We believe regulatory challenges and onetime cost related expenses will take a hit on earnings in FY16 but we expect synergies from Ranbaxy merger to start arising from FY17 onwards. Management has guided synergy benefits of USD 300mn by 2018. At CMP of Rs 843, the stock is trading at 25x FY17E. We maintain 'ACCUMULATE' rating on the stock with the target price of Rs 910", says KRChoksey research report.

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