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Equirus
Sun Pharma (Reduce)
CMP: ₹411.3
Target: ₹479
Sun Pharmaceutical Industries is a pharmaceuticals company. The company’s business segments include US business, Indian branded generics business, emerging markets, global consumer healthcare business and active pharmaceutical ingredients (API). Its rest of the world segment includes Western Europe, Canada, Australia, New Zealand and other markets.
In a conference call today, Sun Pharmaceutical Industries’ MD, Dilip Sanghvi, tried to assuage investor concerns relating to allegations of insider trading and the company’s business structure. Most of the discussion (Link) focussed on related party transactions (Aditya Medisales), insider-trading allegations, low tax rates and a sharp spike in unsecured loans ($300 million+) during FY18. While management highlighted some allegations as factually incorrect and some as retrospective in nature (dating 10-15 years ago), there is still limited clarity on unsecured loans as well as the pending overhang of the alleged 150-page whistle-blower letter to SEBI; this may (or may not) raise further questions and also decide the medium-term course of the stock. Pending clarity, we cut our target multiple from 25x to 22x, and retain ‘reduce’ on the stock with a revised target price of ₹479.
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