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HDFC Securities
Sun Pharma (Buy)
Target: ₹608
CMP: ₹515
Sun Pharmaceuticals is the largest Indian pharma company with 8.2 per cent market share in IPM (Indian Pharmaceutical Market). The company’s US business, which constitutes approximately 37 per cent of revenues, has recorded about 25 per cent CAGR in FY10-20, on the back of acquisitions and timely product launches.
On the back of continuous price erosion and competitive environment, the US revenues have remained muted in the past three years. With moderate price erosion and speciality launches in the US market, we expect company to report healthy growth over the next 2-3 years. Due to Covid-19 related disruptions, traction in the US speciality business has got impacted,though it could recover gradually as the situation improves with the relaxation of the lockdown.
In India, we expect business to grow in line with the industry average. However, higher investments in R&D and promotional spend on specialty business may drag margins in the near term.
Investors can buy the stock with base case target of ₹608 (25x FY22E EPS) and bull case target of ₹668 (27.5x FY22E EPS).
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