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Sun Pharmaceutical Industries - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-08-03 08:41:42

Revenues de-grew 9.4% YoY to Rs. 7585 crore (I-direct estimate: Rs. 7948 crore) mainly due to 27.5% YoY decline in US formulations to Rs. 2136 crore due to high base and continued pressure on dermatology segment (Taro included). India business grew 3.2% YoY to Rs. 2388 crore whereas Emerging Markets business de-grew 2.4% YoY to Rs. 1316 crore. RoW markets business also de-grew 11.1% YoY to Rs. 1030 crore. EBITDA margins expanded 47 bps YoY, 765 bps QoQ to 24.3% (I-direct estimate: 17.0%) despite higher employee expenses mainly due to lower other expenditure and better gross margins. EBITDA de-grew 7.6% YoY to Rs. 1844 crore (I-direct estimate: Rs. 1351 crore). Adjusted PAT de-grew 17.4% YoY to Rs. 1146 crore (I-direct estimate: Rs. 621 crore). Exceptional expense of Rs. 3633 crore pertain to Taro's settlement with US DoJ (cumulative US$419 million) and US$60 million provision for multi-jurisdiction antitrust matters.

Valuation & Outlook

While the company's US generics front is going through calibrated product rationalisation, specialty segment looks promising due to robust product pipeline, steady progress. This metamorphic shift from generics to specialty, however, is likely to weigh on US growth in the near term. That said, higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY22. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front. We maintain BUY and arrive at our new target price of Rs. 625 based on 26x FY22E EPS of Rs. 24.1.

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Shares of SUN PHARMACEUTICAL INDUSTRIES LTD. was last trading in BSE at Rs.519.8 as compared to the previous close of Rs. 531.75. The total number of shares traded during the day was 852757 in over 16832 trades.

The stock hit an intraday high of Rs. 540 and intraday low of 516.6. The net turnover during the day was Rs. 449901272.

Source: Equity Bulls

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