Buy Sun Pharma; target of Rs 1220: Motilal Oswal

Motilal Oswal's research report on Sun Pharma

Sun Pharma (SUNP) delivered in-line 3QFY23 earnings, led by improving traction in specialty sales, better emerging market traction, and currency benefit. Also, the performance was in-line, despite regulatory hurdle at Halol and step-up in other expenses, due to higher selling and distribution spent. We maintain our earnings estimate for FY23/FY24/FY25 and continue to value SUNP at 25x 12M forward earnings to arrive at a price target of INR1,220. We expect 15% earnings CAGR over FY23-25, led by 11%/11%/17% sales CAGR in DF/EM/US, respectively, and 90bp margin expansion. The enhanced focus towards a) strengthening specialty franchise through addition of products in dermatology, and increasing footprint for better reach/promotional activities, b) outperforming industry in branded generics markets and c) building niche ANDA pipeline provides good visibility for sustainable earnings growth going forward. We reiterate our Buy rating on the stock.

Outlook

We maintain our earnings estimate for FY23/FY24/FY25 and continue to value SUNP at 25x 12M forward earnings to arrive at a price target of INR1,220. We expect 15% earnings CAGR over FY23-25, led by 11%/11%/17% sales CAGR in DF/EM/US, respectively, and 90bp margin expansion.

For all recommendations report, click here