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Sun Pharmaceutical Industries Ltd.(Sun Pharma) recently announced its performance for the quarter ended Mar.31, 22. Following are the key highlights.

Highlights from the Quarter (Q4 FY22)

Consolidated sales for the quarter were at Rs.9,446.8 cr recording a growth of about 10.8% yoy. Domestic sales grew at a healthy pace at 16% growth yoy. The growth was driven by a combination of factors like normalized market condition and improved patient flow to doctor's clinics. The company focuses on brand building and launching new products (11 in Q4FY22) led to an increase in the market share from 8.1% in Q2FY22 to 8.9% in Q4FY22. Contribution from COVID product was negligible at about 1% of India sales for the quarter. The company is undertaking an expansion of about 10% of our field force in the FY23 driven by the twin objective of brand focus and geographical expansions. US formulation recorded 8% yoy growth to Rs.2,925 cr, accounting for 31% of total sales. Doctor’s clinics have opened up, however, patients flow to the clinics along with calls and meet by medical representatives are below preCovid levels. The current generic pipeline for the US market includes 93 ANDAs and 13 NDAs awaiting approval with the US FDA. Global specialty revenue contribution has doubled from about 7% in FY18 to about 13% in FY22. In FY22, it recorded a strong ramp up in the specialty sales, which were up by 39% to reach $674 mn. Specialty revenue in US have grown over Q4 last year, mainly driven by Ilumya, Cequa and Odomzo, while Absorica sales declined due to the entry of generics.

Following is the guidance given by the company:

* Revenue growth of high single-digit to low double-digit.

* R&D investment is expected to be between 7% to 8% of sales in FY22.

* Most of the specialty products are in growth phase leaving enough headroom to continue the growth trajectory.

OUTLOOK AND VALUATION

We forecast Sun Pharma’s revenue/PAT to grow at 11.5%/11.9% CAGR over FY21- 24E. With the improvement in the specialty business and domestic business, we expect ROCE to increase by ~60bps by FY24E. Going forward, we expect company to deliver an EPS of Rs.37.5 in FY24; assigning a target multiple of 30x, we arrive at a target price of Rs.1,000 showcasing an upside potential of 16% from current levels with an investment horizon of 18-24 months.

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