Sun Pharma, Nykaa, Deepak Nitrite, Ramco Cements, Metropolis, Star Cement Q4 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Sun Pharma - Industries Growth visibility stays; R&D up for specialty assets

Sun Pharmaceutical Industries Ltd.'s Ebitda growth (+9% YoY) was led by 10% YoY sales growth (US: flat QoQ; global specialty: +14% YoY^; India: +10% YoY, emerging markets: +12% YoY) and higher gross margin (+72 bps), which was partly offset by higher staff/R&D/SG&A (+5/38/10% YoY).

Sun Pharma guides for high-single-digit revenue growth in FY25 on steady growth across the business. It will continue to invest in the specialty businesses to scale up this business in the US as well as in ex-US market through geographical expansion for its specialty portfolio.

Factoring in the guidance, we have cut FY25 EPS by ~2% but retained for FY26E. We retain target price at Rs 1,750 (31 times FY26E EPS). Maintain Buy, given growth drivers like —

1. specialty scaleup (traction in Ilumya, Winlevi, Cequa; launch of Concert’s Deuruxolitinib– PDUFA date in July 2024),

2. traction in US generics (new launches),

3. India (MR addition, new launches, in-licensing), and

4. strong cash position (enables M&As).

FSN E-commerce - Ventures (Nykaa) Customer acquisition in BPC stepped up

Nykaa’s Q4 top line grew 28.1% YoY to Rs 16.68 billion (our estimate: Rs 16.75 billion). BPC/Fashion revenue grew 24/27%. Customer acquisition in BPC has been stepped up. Despite this, new customers’ salience in gross merchandise value dipped (21% in Q4 FY24 versus 22% in Q4 FY23).

Ad income is estimated to have declined by ~50 bps YoY for Q4 (100 bps in FY24) as brands attempt to balance discounts and ad spends. Given the rising skew of non-BPC GMV; GM continued to contract (- 166 bps YoY to 42.6%; in-line).

Ebitdam for Q4 stood at 5.6% (our estimate: 4.9%). Adjusted Ebitdam stood at 6.7% for Q4 after adjusting for-

1. ESOP expenses,

2. GCC business expenses, and

3. corporate restructuring expenses.

We’ve cut our FY25/26 Ebitda estimates by 5-7% to account for higher CAC in BPC and GCC investments.

Maintain Reduce with a DCF-based target price of Rs 150/share (implying 74 times FY26 enterprise value/Ebitda).

Deepak Nitrite - Subsidiary to drive growth

We maintain Sell on Deepak Nitrite Ltd., with a price target of Rs 1,537 (WACC 12%, terminal growth 4%). The stock is currently trading at 33/26 times FY25/26E EPS, which we believe is contextually high.

Ebitda was 18% below our estimates owing to higher-than-expected raw material expenses. The company reported an exceptional item gain of Rs 798 million during the quarter towards claims from the insurance company. Adjusted for an exceptional item, APAT was 25% below our estimates.

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