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Last Updated : Aug 14, 2019 04:34 PM IST | Source: Moneycontrol.com

Buy Sun Pharma; target of Rs 545: HDFC Securities

HDFC Securities is bullish on Sun Pharma has recommended buy rating on the stock with a target price of Rs 545 in its research report dated August 14, 2019.

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HDFC Securities' research report on Sun Pharma


Sun Pharma improved its operational performance on all parameters driven by a one-time generic order in the US and lower R&D spend. Revenue/EBITDA/PAT were up 16/14/31% YoY in 1QFY20. At US$ 424mn, the US revenues grew 16/-6% YoY/QoQ, largely driven by a one-time six-month contract during the last two quarters. The top-line is likely to normalize from 2Q onwards. However, overall US revenues were still ahead of expectations in 1QFY20. We believe specialty ramp-up remains the key contributor for Sun Pharma to grow its US top line over the next two years. Anticipate ~10% CAGR over FY19-21. Ilumya scale-up continues to happen at a slow rate. Post the restructuring in 4QFY19, India biz grew 8% YoY to Rs 23bn in 1QFY20. According to the management, the underlying growth remains at 12-13%. We continue to model India segment’s growth at high single digits with slowed IPM growth over the last 2 years. An 8.2% market share and leadership across all therapies make it difficult to outperform the IPM rate, in our view. EBITDA margin at 23% was up 807bps QoQ, 228bps higher than expectations as R&D spend fell to 5% of sales v/s expectation of ~7.5%. Discretionary specialty spend continues to weigh in on margin expansion.


Outlook


We maintain BUY on SUNP following a beat to our estimates. Our TP is at Rs 545 (22x FY21E EPS). The execution in specialty segment is crucial.

For all recommendations report, click here

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First Published on Aug 14, 2019 04:34 pm
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