Hold Sun Pharmaceutical Industries; target of Rs 479: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Sun Pharmaceutical Industries

Taro Pharma’s sales declined 33% QoQ to US$118m in Q1FY21 v/s US$175m in Q4FY20. The company reported lowest revenue in last 36 quarters including lowest ever gross profit and gross margin. Though Q4FY20 was an exceptional quarter where revenues shot up due to stocking up during COVID yet its revenue, gross profit and gross margin continued to be impacted due to derma products price erosion. Taro reported net loss of US$434m due to one-time settlement charge of US$418.9m and US$60m provision related to ongoing multi-jurisdiction civil antitrust matters. While the settlement with Department of Justice (DOJ) is a sign of relief for Taro, its growth prospect remains weak due to price erosion and limited pipeline. We expect US business will continue to face challenges for SUNP because of 1) lower revenue from specialty products, 2) lack of approvals due to Halol regulatory issue, 3) Taro’s persistently weak performance and 4) R&D spends on Ilumya for new indications.

Outlook

While US generic price erosion stabilized at 5-7%, Taro continues to face challenges due to large contributions of revenues (75-80%) and EBITDA (85%) from derma products in US. With 40-45% contribution of Taro to the overall US revenues for SUNP, we maintain ‘HOLD’ on SUNP and retain TP of Rs479.

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