Buy Sun Pharmaceuticals; target of Rs 571: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital's research report on Sun Pharmaceuticals

Sun reported in-line sales in Q1 (down 10% YoY), however sharp cut in opex, lower R&D spend and improved product mix (partially aided by currency) aided EBITDA margins at 23.3% (we saw 18%) while one-offs related to Taro’s settlement with DOJ and additional provision for ongoing US states litigation restricted PAT. While large part of the operating improvement will taper in ensuing quarters, management’s commentary on 2 aspects (1) Some portion of costs savings in India might be permanent in nature – digital product launches and (2) some products in the specialty segment to achieve break-even by FY22; could drive operating leverage by ~100-150bps going ahead.

Outlook

We believe the risk reward is favorable given the strong FCF generation of US$365mn over FY20-22E and FCF/EBITDA at ~60%. We build in 10%/22% CAGR for sales/PAT for FY20-22E. Maintain BUY.

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