Hold Sun Pharmaceutical Industries; target of Rs 602: Prabhudas Lilladher

Prabhudas Lilladher's research report on Sun Pharmaceutical Industries

Taro’s revenue was sequentially flattish while gross profit and gross margin were lower QoQ indicating continual price erosion, unfavorable product mix and impact from COVID. We expect sales growth to be muted and quarterly revenue to remain stable in the range of US$140-150m. Key event for Taro in the near-term would be utilization of US$1.55bn cash and cash equivalent for acquisition of specialty products, as its own products pipeline have only 17 ANDAs pending with USFDA.

Outlook

We believe that a sizeable part of US sales growth would be led by performance of its specialty portfolio and resolution of Halol facility, while Taro (contributes 40-45% of US sales) will report range bound earnings with limited downside from these levels. We have HOLD rating on SUNP with TP of Rs602 based on 21x (PE) of FY23E.