Buy Suven Pharmaceuticals; target of Rs 522: Anand Rathi

Anand Rathi 's research report on Suven Pharmaceuticals

On a higher base because of a huge one-time order for a women’s health product last year, Suven’s Q4 FY20 sales were down 26.4% y/y to `1.8bn. Sequentially, though, sales grew 3.4%. The gross margin was up 137bps to 71.3%. On higher staff costs and other expenses, the 41.9% EBITDA margin was down 677bp y/y. Despite the muted top-line, at `742m, PAT was flat due to the lower tax rate (realized prior year’s tax credit). The pickup in commercial molecules in pharma and specialty chemicals and forward integration to APIs and formulations are likely to drive 13.5%/18.1% growth in sales/earnings over FY20-22. Despite the recent rally in the stock price, we believe it is still priced attractively, at 11.4x FY22e EPS, and can provide 31% returns from levels now.

Outlook

We retain our Buy recommendation, with a higher target of `522 (earlier `403).

Suven Pharmaceuticals 23062020-rathi

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