Buy Sun Pharmaceuticals; target of Rs 660: Dolat Capital

Dolat Capital's research report on Sun Pharmaceuticals

Given the structural headwinds in the US faced by Indian generic companies, Sun’s investments to build a branded specialty business is a key differentiator. However, Specialty pharma is a vastly different business model compared to traditional generics requiring significantly superior R&D skills, M&A capabilities, business development strategy and risk appetite. Having built a branded portfolio focused on dermatology and ophthalmology, Sun is ahead of Indian peers in building a specialty business in the US. Ramp-up of Ilumya, Cequa, Yonsa, Xelpros, Bromsite and Odomzo sales are value drivers for SUNP’s specialty business in the next 3-4 years.

Outlook

We value the company on an SOTP basis and assign India formulation 18x EV/EBIDTA, 12x EV/EBITDA to RoW/EM and 7x EV/EBITDA for US formulations. We maintain BUY with target price of Rs660 (implied PE 25x FY23E).