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Motilal Oswal
Sun Pharma (Buy)
Target: ₹960
CMP: ₹842.5
After having toughed out for more than three years in the US, its flagship product Ilumya is continuously ramping-up sales, with Cequa also showing good traction. This is slightly offset by generic competition in Absorica and difficulty in shifting prescriptions to Absorica LD.
Ilumya has been able to carve out a niche for itself in the fiercely competitive Psoriasis segment. Ilumya, being a medical benefit product, does not directly compete with most drugs which fall into the pharmacy benefits segment. Its new mechanism of action, fewer dosage, and low side effects also bodes well for better uptake.
US Generics, excluding Taro, have stabilized and are currently faring better than the industry, which is seeing high single-digit price erosion. Sun Pharma has been able to counter the price erosion in the base business with new product launches and better supply chain management.
We remain positive on Sun Pharma due to: a) investments in the global Specialty portfolio improving overall profitability; b) a robust pipeline of NDAs/ANDAs; c) revival in the Branded Generics segment in DF; and d) incremental contribution from an expanded field force. We expect 16 per cent earnings CAGR over FY21-23, led by a 15 per cent/13 per cent revenue growth in the US/DF.
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