ICICI Direct recommended hold rating on Sun Pharmaceuticals with a target price of Rs 460 in its research report dated February 13, 2019.
ICICI Direct's research report on Sun Pharmaceuticals
Q3FY19 results were a beat vis-a-vis I-direct estimates on the profitability front mainly due to forex gain, lower R&D and tax rate Revenues grew 16.3% YoY to Rs 7740 crore (I-direct estimate: Rs 7609 crore) on the back of 22.7% YoY growth in the US to Rs 2606 crore (I-direct estimate: Rs 2609.5 crore). Taro’s sales grew 26.3% YoY to Rs 1271crore (I-direct estimate: Rs 1178.5 crore) EBITDA margins improved 597 bps to 27.8% (I-direct estimate of 22.5%), mainly on higher gross margins, lower R&D and forex gains. Excluding forex gain, EBITDA margin was 24%. EBITDA grew 48.1% YoY to Rs 2152.9 crore (I-direct estimate: Rs 1712 crore) Net profit grew 239.9% to Rs 1241.9 crore (I-direct estimate: Rs 1018.9 crore) mainly due to a strong operational performance and lower tax rate (15.7% vs. 65.2% in Q3FY18).
These issues are likely to outweigh the company’s sound fundamentals in the near term. Our target price is Rs 460 based on 18x FY21E EPS of Rs 23.5 and Rs 38 NPV for Ilumya.
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