Sun Pharma Q2 Results Review - India Branded Generic Growth Surprises; Upgrade To 'Buy': Systematix

Systematix Research Report

Sun Pharmaceutical Industries Ltd.'s Q2 FY25 revenue was in line, but Ebitda and net income came in below our estimates owing to higher-than-expected operational expenses (up 11% QoQ).

Higher other expenses were attributable to an increase in selling and Distribution expense. India branded formulation growth remained strong (11% YoY) and largely led by volume growth ( 5% versus 0.7% IPM volume growth) research and development expenditure stood at 6% of sales during the quarter as against the guided range of 8-10% due to a delay in the start of some clinical studies. R&D spend is expected to increase in subsequent quarters and will be in the 7-8% range for the full year FY25.

Specialty sales during the quarter stood at $286mn (up 19.2% YoY). Novel specialty asset – Leqselvi (Deuruxolitinb) which was supposed to aid specialty ramp up during the year, is awaiting court judgement for the launch.

Overall US formulation sales during the quarter increased 22% YoY and 11% QoQ with gRevlimid (Lenalidomide) sales being higher QoQ alongside a healthy base business growth (gPentasa and gCiprodex).

We tweak our estimates on Sun Pharma and roll over our price target to September FY27E EPS.

We also revise our target valuation multiple to 35 times to arrive at a target price of Rs 2,198. Our revised target multiple is to reflect a growing R&D pipeline of late-stage novel assets by FY27.

We upgrade Sun Pharma to Buy from Hold.

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