Motilal Oswal is bullish on Sun Pharma has recommended buy rating on the stock with a target price of Rs 540 in its research report dated February 12, 2019.
Motilal Oswal's research report on Sun Pharma
Sun Pharma's (SUNP) revenue grew ~16% YoY to INR76.6b (our estimate: INR77.3b) in 3QFY19, led by higher Taro and API sales. Gross margin (GM) expanded ~350bp YoY (-260bp QoQ) to 71.7%, led by better revenue growth and an improved product mix. EBITDA margin, too, expanded by 210bp YoY to 23.1% owing to GM expansion and lower employee cost (-206bp YoY as % of sales), partly offset by higher other expenses (+190bp YoY). Revenue growth, coupled with a better operating margin, led to adj. PAT of INR9.4b (our estimate: INR10.2b). For 9MFY19, sales/EBITDA/adj. PAT increased 12%/26%/26% YoY to INR216b/INR47.3b/INR29b.
We cut our FY19/20/21 EPS estimates by 4.5%/5.4%/4% to factor in subdued growth in the domestic formulation business and the delayed pick-up in the US business. We roll to 22x (unchanged) 12M forward earnings and arrive at a target price of INR540 (prior: INR560).
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