Sun Pharma - Q4 FY21 Result Update - YES Securities

(Rating: ADD, TP: Rs790, Upside: 12%)

- Non-Taro US sales which showed first signs of life in Q3 FY21 may have temporary given up some gains as part pre-buying weighed on specialty sales in Q4.

- In Q2 update, we had outlined that until signs emerge of specialty turnaround, we would be reluctant to change our negative stance. Now ex-Taro US business has delivered in two successive quarters which we think lends a credible bulwark for the next 2 years.

- While competitive landscape in the branded business remains fierce as before, Sun has managed to grow ex-Taro quarterly revenues to one of their highest (in last few years at least) barring two exception-filled quarters in CY19

- Product wise Ilumya, Cequa have shown ability to grow in past 2 quarters and while generic Absorica would dent sales, reckon on balance, US business ex-Taro should maintain average US$240mn run rate in FY22.

- We raise FY23 target PE to 24x (from 15x earlier) as risks to US specialty business have receded after 2 quarters of solid execution. We upgrade to ADD from SELL with revised target price of Rs790 (Rs400 earlier). A large part of our change in TP is driven by change in PE multiple and less due to valuing on FY23 EPS. We are ~10% ahead of consensus on FY23 earnings

- Since Q2 FY21 result, stock has rallied and outperformed BSE Healthcare index; albeit, on a 1Y basis, SUNP has still underperformed benchmark indices. We expect stock to outperform LPC (tepid inhaler traction, target PE 22x) and DRRD (target ~23x PE) as US specialty business revenues play out.

Shares of SUN PHARMACEUTICAL INDUSTRIES LTD. was last trading in BSE at Rs.669.65 as compared to the previous close of Rs. 699.75. The total number of shares traded during the day was 1451657 in over 38403 trades.

The stock hit an intraday high of Rs. 698.6 and intraday low of 666.55. The net turnover during the day was Rs. 979307543.

Source : Equity Bulls

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