Buy Sun Pharma; target of Rs 980: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal`s research report on Sun Pharmaceutical“SUNP’s FY14 annual report provides good visibility on the key pillars of growth which include enhancing its pipeline of complex/specialty products for the US and successfully turning around Ranbaxy’s operations. Future focus will be on building a differentiated product basket, foraying into products that yield stable and consistent cash flows. At the same time, the company continues to be on the lookout for value enhancing inorganic opportunities in the US.""The India subsidiary created last year (Sun Pharma Global) has shown a PBT of INR3.4b versus a negative PBT of INR1.3b in FY13. URL Pharma did sales of INR 17.6b with PAT of INR 6b (margins of ~30). A significant part of URL Pharma performance in FY14 was driven by favourable pricing for key products and re-launch of some of the discontinued products from URL’s portfolio. Recently, prices of some of these products have normalised significantly and hence a part of URL Pharma’s performance may not be sustainable in our view. Dusa Pharma reported sales of INR 4.3b versus INR975m in FY13 (consolidated for three months) while it turned profitable in FY14 (INR237m vs loss of INR47m in FY13). This was driven by greater penetration with dermatologists and gradual price increases. SUNP is carrying hedges of USD240m with MTM loss of INR2b classified as long-term provision. This implies hedges are for a period of over one year, largely hedged in the range of 50-52. Contingent liabilities related to income tax on account of disallowance/ addition has increased from INR7.6b in FY13 to INR12.1b in FY14.""We remain confident of SUNP’s business mix and execution skills in its key markets. We however see a slow FY15 for SUNP’s base business which we believe is expected to bounce back to mid teens growth in FY16. But, prospects of consolidating Ranbaxy’s business and potential turn-around continue to remain appealing. We maintain Buy with a revised target SoTP price target of INR980 which includes upsides from Ranbaxy’s business. However, stock may trade in a narrow range till the RBXY deal concludes and any decline presents a buying opportunity,” says Motilal Oswal research report.

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