Sun Pharma Q3 Results Review - Specialty Portfolio Momentum Continues To Surprise: Systematix

Systematix Research Report

Sun Pharmaceutical Industries Ltd.'s Q3 FY24 earnings were strong (up 16% YoY) and in line with expectations. Specialty portfolio was up 15% QoQ and 23% YoY which aided earnings growth and helped offset growth challenges in emerging markets (currency headwinds).

India branded formulation growth was also healthy (11.4%). Company recorded a milestone income of $20 million during the quarter related to specialty portfolio and aided gross margin expansion (75 bps QoQ). Ebitda margins expanded 200 bps QoQ led by operating leverage and gross margin expansion of 75 bps QoQ.

U.S. generic business continues to be depressed owing to supply challenges. A recovery in generic business should help Sun Pharma accelerate its growth momentum in the U.S. which is currently being led by Specialty business.

We have tweaked our forecasts for Sun Pharma and roll over our price target to FY26E earnings per share.

Our new target price is Rs 1,488 based on 27 times FY26E EPS. We recommend a hold rating as we see a limited upside potential at current market price.

We expect Sun Pharma to clock revenue / Ebitda / EPS compound annual growth rate of ~10% / 12% / 16% over FY23-FY26E respectively.

The company continues to expand its research and development investment which was higher 6.6% QoQ and 6.7% of sales.

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