Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Sun Pharmaceutical Industries - Operationally strong performance - ICICI Securities

Posted On: 2020-08-03 08:43:03

Sun Pharmaceutical Industries' (Sun) reported strong operational performance in Q1FY21 beat our estimate of gross and EBITDA margin by 250bps and 450bps respectively. However, revenue growth was below estimate largely due to weak performance in Taro. Consol. revenue declined 9.4% YoY to Rs75.9bn (I-Sec: Rs81.2bn) and adj. PAT dropped 17.4% to Rs11.5bn. Gross margin improvement of 330bps was driven by better revenue mix and focus on operational efficiency in manufacturing, partially sustainable in our view. Drop in global specialty sales is temporary due to lockdown and would recover in coming quarters. We remain positive on long-term outlook considering strong India business, scale-up of specialty sales and focus on margin expansion through superior revenue mix and operational efficiency. Reiterate Sun Pharma as top pick.

- India growth surprises positively, US impacted by COVID-19: India business growth stood at 3.2% YoY vs estimated flat sales and industry decline of ~5%. The outperformance was led by strong chronic portfolio which grew ~10% and we expect trend of higher than industry growth to continue. US revenues declined 24.8% QoQ to US$282mn due to weak sales in Taro and specialty products on account of COVID-19 related lockdown. However, we believe this is temporary and sales would improve in coming quarters. Specialty revenue stood at US$78mn, a drop of 38.1% QoQ. We expect US revenues to remain flattish over FY20-22E with decline in Absorica sales in H2FY21 and generic price erosion. API sales grew strong by 20.1% driven by strong demand for API products.

- Margin beat partially sustainable: EBITDA margin at 24.3% was 450bps higher than our estimate led by improved gross margin, lower S,G&A amid lockdowns and reduced R&D spend. Gross margin improvement was driven by superior product mix (higher chronic sales in India) and better operational efficiency in manufacturing. We believe margin expansion caused by operational efficiency, revenue mix and cost control is sustainable. We raise our EBITDA margin estimates by ~100bps to 23.1% in FY21E and 24.4% in FY22E.

- Outlook: We expect India business growth to remain strong and other markets growth to revert to positive trajectory in coming quarters. Overall, we expect 7.9% revenue and 24.6% adjusted PAT CAGRs over FY20-FY22E with EBITDA margin expansion of 320bps. Recent settlement by Taro for DoJ investigations for US$419mn removes the key overhang from the stock.

- Valuations and risks: We raise EPS estimates by 3-5% to factor in better margins and remain positive on long term outlook. Reiterate BUY with a revised target price of Rs612/share based on 24xFY22E EPS (earlier: Rs585/share). Key downside risks are: higher than expected pricing pressures in the US, and regulatory hurdles.

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

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:


Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

General insurance - Fire, health remain growth drivers, rising Covid claims a concern - ICICI Securities

Supreme Industries - Perfect recipe for rerating; upgrade to BUY - ICICI Securities

Titan Company - Best positioned to gain from faster-than-expected recovery. Upgrade to ADD - ICICI Securities

Sector Update - Telecom - Sep 23, 2020 - ICICI Securities

Allcargo Logistics - Highlights of Blackstone deal - ICICI Securities

I-direct Instinct - Gokaldas Exports

Economy: RBI's trilemma: allows for INR strength - Kotak

HCL Technologies - Company Update - ICICI Securities

Chemcon Speciality Chemicals - IPO Review - ICICI Securities

Angel Broking - IPO Note - YES Securities

TCS - Announcement of its blockhchain based solutions on Microsoft Azure - Angel Broking

Amber Enterpirses acquire Sidwal - Angel Broking

Dixon Technologies - Buy - YES Securities

HCL Technologies acquisition of DWS Limited - Angel Broking

Allcargo Logistics CFO Resignation - Angel Broking

Upgrade to BUY on Gateway Distriparks - Strengthening the balance sheet - HDFC Securities

BUY on ITD Cementation - Execution pickup awaited - HDFC Securities

Allcargo Logistics - Trying to stich through an integrated offering - ICICI Securities

Polymer price tracker - Other polymer (ex-PVC) prices too firm up - ICICI Securities

Angel Broking - IPO Review - ICICI Securities

IPO Review - Computer Age Management Services - ICICI Securities

Company Update - EIH Ltd - ICICI Securities

Gladiator Stocks - Godrej Properties - ICICI Securities

Company Update - Dr Reddy's Laboratories - ICICI Securities

Gladiator Stocks: Pharma Thematic - ICICI Securities

Company Update - Housing & Urban Development - ICICI Securities

Covid Recovery Pulse - E-Way bill generation shows recovery signs with auto volumes flat - ICICI Securities

Quant Pick - UltraTech Cement - ICICI Securities

Lupin & Cipla - Positive News - Angel Broking

Sterling and Wilson Solar Ltd - 106.71 MW order win - Angel Broking

Dr. Reddy's Laboratories - Settles Revlimid litigation in US - ICICI Securities

Natco Pharma - Natco to launch first generic Revlimid - ICICI Securities

Solar Industries - Overseas and defence key to profitability - ICICI Securities

Federal Bank - Strengthening liability muscle; fees & charges revised upwards - ICICI Securities

HCL Technologies Mr. Jyoti Roy, DVP - Equity Strategist, Angel Broking Ltd


I-direct Instinct - Intellect Design Arena

P&G Health - Company Update - ICICI Securities

Relaxo Footwears - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Bata India - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Listing of Happiest Minds Technologies - Angel Broking

Dr. Reddy's Lab - Sep 17, 2020 - Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019