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Emkay Global
Sun Pharma (Hold)
Target: ₹720
CMP: ₹669.65
We downgrade Sun Pharma to Hold as we believe current valuations amply captures all the upside related to specialty. The stock is trading at one-year fwd PE of 28x. We value it at 24x PE on our FY23 EPS and add SCD044 NPV of ₹15 to arrive at a target price of ₹720 (₹660 earlier)
Q4 revenue of ₹8,520 crore was largely in line with our estimates. EBITDA came in at ₹2,060 crore, marginally missing our estimates by 3 per cent. EBITDA margin of 24.2 per cent came in line with our estimate. Adj. PAT of ₹1,340 crore was ₹also in line.
Global specialty revenue of $139 million in Q4 was in line with our expectations. Global Ilumya sales of $143 million for FY21 puts Q4 Ilumya sales at $45-47 million, a tad lower than expectations. The q-o-q softness was attributed to seasonally higher sales in Q3.
We largely maintain FY22/23 estimates. We expect y-o-y margin compression in FY22 due to an increase in promotional and R&D expenses. We introduce FY24 estimates with revenue, EBITDA and EPS of ₹44,000 crore, ₹12,000 crore and ₹35 respectively. We expect a reversal of Covid-related savings to continue, leading to 50-60 bps EBITDA margin compression in FY22. However, continued specialty ramp-up is expected to lift EBITDA margin to nearly 26 per cent in FY23.
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