Target: ₹1,305
CMP: ₹1,140.75
Sun Pharmaceutical’s Q2 performance was in line with JMF/ Street estimates. Revenue growth was led by India and RoW markets whereas US performance was muted.
While increase in global specialty sales (₹240 million; +19 per cent YoY), gRevlimid (lower QoQ) and new launches (such as gVyvanse) bring stability to the US business, impact of Halol/ Mohali site issues may keep near-term growth in check. The USFDA has accepted Deuruxolitnib 8mg filing for review - Sun Pharma clarified that the launch could be post approval (key positive; FY25-end launch likely).
We continue to believe that Deuruxolitinib will be a significant growth driver for Sun Pharma with potential to scale up to ₹400-500 million revenue within 4-5 years of its launch. Domestic business grew 11 per cent YoY (3 per cent beat) and the management aims to deliver IPM-beating performance consistently over the long term. Big-ticket M&As can not be ruled out given Sun Pharma’s strong cash position. Sun Pharma’s domestic leadership, balance sheet strength and long-term specialty growth visibility reaffirm our positive stance on the stock.
We increase our multiple to 26x (vs. 25x earlier) and reiterate the company as our top pick in the sector.