Dolat Capital's research report on Sun Pharmaceuticals
Sun reported in-line sales in Q4 while higher bonus payouts, spend in Taro (believe related to higher volumes) and forex loss impacted EBITDA margins (18.4% vs our estimate of 21%) while one-offs related to litigation cost provision led to 20% miss in our PAT estimates. However, dip in margins remains an aberration and is expected to normalize in subsequent quarters. Global specialty portfolio recorded sales of US$126mn (up from US$118mn QoQ) led by seasonality in Levulan and Absorica coupled with Rx improvement in Ilumya, Cequa and Yonsa. Management indicated steady increase in patient/doctor prescription for Ilumya and Cequa, although Q1 will be impacted due to COVID. Pricing pressure in US remains unabated, R&D to inch up to 8%+ of sales subject to additional indication clinical trials for Ilumya and improving Rx for Cequa remain key highlights. Sun has deferred its annual guidance to Q1 due to uncertainties related to COVID.
We build in 9%/22% CAGR for sales/PAT for FY20-22E. At CMP, stock trades at 19.6x FY22 EPS and 11.3x EV/EBITDA. Recommend BUY with a Target price of Rs530.
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