Buy Sun Pharmaceutical Industries Ltd For Target Rs.2,300 by Choice Institutional Equities
Innovation-led Expansion Positions SUNP among Global Pharma Leaders
SUNP continues to deliver a healthy growth and maintain its #1 position in the IPM. We project this momentum to sustain, supported by launches across its specialty and innovative portfolio. While the US business faces near-term challenges, we believe these should be offset by a healthy growth in India and emerging markets. Further, the addition of biosimilars from the Organon acquisition and a stronger position in the global innovative medicine market further strengthen our medium-term growth outlook. To reflect the projected weakness in the US, we lower our FY27E/FY28E estimate by 3.6%/1.1%, respectively. However, we believe SUNP is wellpositioned to leverage its market leadership and acquisitions to drive growth and synergies. We retain our target price of INR 2,300 and ‘BUY’ rating.
Core Business Delivers; One-off Charges Weigh on Reported Earnings
* Revenue grew 11.9% YoY / 5.9% QoQ to INR 1,61,987 Mn (vs. CIE estimate of INR 1,61,236 Mn).
* EBITDA grew 4.8% YoY / 7.4% QoQ to INR 47,439 Mn; margin contracted 198 bps YoY and expanded 41 bps QoQ to 29.3% (vs. CIE estimate of 29.3%).
* Reported PAT decreased 36.2% YoY / 31.3% QoQ to INR 19,885 Mn.
* The results were affected by exceptional items recorded of INR 12,688 Mn owing to anti-trust settlement charge and Organon acquisition-related cost. Adjusted PAT stood at INR 27,924 Mn.
Innovative and Specialty Pipeline to Drive Next Phase of Growth
SUNP delivered a healthy growth across markets except the US due to marketrelated and execution challenges in Ilumya. With the Organon acquisition progressing well, the management maintained its overall guidance of high singledigit growth. Excluding Organon, we project 11.7% revenue CAGR in the next three years, driven by:
* India: SUNP maintained its leadership in Semaglutide and ranked #1 in the overall pharma market in India. We project the business to continue outperforming the IPM, supported by launches and volume gains. The company launched 15 products in Q2FY27.
* US: The business continued to face pressure from Lenalidomide erosion and slower Ilumya growth, reflecting both, market-related factors and execution, challenges. While the rest of the innovative medicine portfolio performed well, the management expects Ilumya to normalise over the next 2–3 quarters.
* EMs and RoW: Growth momentum is projected to sustain, supported by branded generics and a rising contribution from innovative medicines.
Despite near-term US challenges, we believe SUNP remains on track to sustain a healthy growth, supported by a strong launch pipeline, particularly in innovative medicine. We project EBITDA margin to remain at ~30%, despite higher R&D and acquisition-related cost
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