Hold Sun Pharmaceuticals; target of Rs 790: Axis Direct

Axis Direct's research report on Sun Pharmaceuticals IndustriesSun Pharma’s Q1EBITDA was in line with our estimate led by strong US sales growth of 25% YoY (5% QoQ) driven by steady gGleevec sales. Despite similar run-rate in gGleevec sales, US sales (ex-Taro) grew 17% QoQ (USD 58 mn) led by USD 35mn of one-off sales (to be offset in future) and some improvement in base portfolio. Taro was 19% of Sun’s revenue and 46% of EBITDA. With majority of remediation complete, Sun awaits USFDA inspection of its Halol facility. Despite 23% YoY rev. growth in Q1, Sun maintained its 8-10% growth guidance for FY17 led by ongoing headwinds like currency issues and rationalization in EM and RoW markets, pricing policy issues in India and price erosion in US. We maintain HOLD rating with TP of Rs 790(23x FY18E EPS)given uncertain USFDA resolution timeline on Halol facility (key rerating catalyst, as it would ramp up ANDA approvals).