Buy Sun Pharmaceutical Industries; target of Rs 672: Prabhudas Lilladher

Prabhudas Lilladher's research report on Sun Pharmaceutical Industries

We upgrade SUNP to BUY (earlier Hold) as we increase our earnings estimate by 4%/11%12% for FY21/22/23E on the back of better visibility for specialty products and improved approval rate for US(Gx) post-Halol resolution. This would lead to improved EBITDAM and change in the US business mix. IIumya 9MFY21 sales have already surpassed FY20 sales and we believe growth prospects are much better in FY22-23E once COVID cases subside in the US and dermatologists operate with normalcy. Halol resolution is also expected in 1HFY22E without further escalation which would improve new products approval which has been muted in FY20-21. SUNP has already completed its Corrective and Preventive Actions (CAPA) for Halol and is currently waiting for a physical USDFA audit.

Outlook

Our new rating is BUY (earlier Hold) and new TP is Rs672 (earlier Rs602) based on 21x(PE) of FY23E EPS of 32.