CLSA retains buy on Sun Pharma; sees 40% FY17 EBITDA growth

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26 Aug, 2025 12:21

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CLSA has maintained its buy rating on Sun Pharmaceutical Industries with a target price of Rs 1,088 as it believes strong pipeline of differentiated products and ability to generate strong free cashflows should sustain premium valuation to peers/sector.

According to the brokerage, India & core US businesses and generic Gleevec launch are critical to drive its FY17 EBITDA (earnings before interest, tax, depreciation and amortisation). It expects 40 percent Y-o-Y FY17 EBITDA growth for Sun Pharma.

It believes this EBITDA target can be met if India sales grow 15-16 percent (above market), with improving field force productivity for the Ranbaxy portfolio; core US sales accelerate via new approvals (15-20 approvals) & resolution of US FDA issues at Halol (improved supplies can allow Sun to regain lost market share in certain products); and generic Gleevec in the US contributes with high margins (launch due in February 2016).

Generic Gleevec is used for the treatment of chronic myeloid leukemia. After a settlement agreement with Novartis in May 2014, Sun had said subsidiary may launch its version of generic Gleevec (Imatinib Mesylate tablets) in the United States on February 1, 2016. As per IMS, Gleevec had annual sales of approximately USD 2 billion in the US.

Sun Pharma has guided for recurring synergy benefits of USD 300 million from the Ranbaxy acquisition by FY18.

Out of which, CLSA expects USD 100m-120 million to be realised in FY17, largely coming from India, cost savings and a small contribution from emerging markets.

For FY18, it expects stronger traction in emerging markets, continued cost synergies and synergies from the US which should drive a cumulative benefit of USD 300 million, implying around 20 percent EBITDA margin.

The only risk for EBITDA growth is delay in new approvals or no Halol resolution.

Sun had stated that it expects supplies from Halol to continue to improve and its effort will be to bring the facility back into compliance.

At 11:45 hours IST, the scrip of Sun Pharmaceutical Industries was quoting at Rs 900, down Rs 0.75, or 0.08 percent on the BSE.Posted by Sunil Shankar Matkar