Sun Pharma Q4 Results Review - Steady India Growth; Specialty Sales Drives U.S. Growth: Dolat Capital

Dolat Capital Report

Sun Pharmaceutical Industries Ltd.’s Q4 FY24 operating performance was below our estimate on account of higher research and development and other expenses. Excluding exceptional expenses, adjusted profit after tax came above our estimate due to higher other income and lower tax rate.

Sun Pharma guided high single digit revenue growth in FY25 and R&D expense in the range of 8-10% of sales, as FY25 will be an investment year.

We downgrade our FY25E/FY26E earnings per share estimates by 3.1%/3.5% assuming higher R&D expenses. We expect revenue/profit after tax compound annual growth rate of 11%/13% over FY24-26E and ascribe 30 times FY26E P/E (earlier 28 times) with revised target price of Rs 1,615 (earlier Rs 1,563).

We increase our multiple on back of consistent traction in Specialty business. However, given recent rally in the stock price, we see limited upside from current levels despite increasing multiple.

Consequently, we revise our rating to ‘Reduce’ from Accumulate. We recommend investors to Accumulate on dips. Key upside will be higher-than-expected traction in specialty sales and key downside will be further escalation of regulatory issues on plants.

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