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ICICI Securities
Sun Pharmaceutical Ind (Buy)
CMP: ₹392.6
Target: ₹478
Sun Pharmaceutical Industries Ltd 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. The company offers its products to therapy areas, such as cardiology, neuro-psychiatry, gastroenterology, anti-infective, diabetology and dermatology. Its units produce generics, branded generics, specialty products, over-the-counter (OTC) products, anti-retroviral (ARVs) and APIs.
Sun Pharmaceutical Industries’ stock price has corrected about 20 per cent in the past two months and we believe the key concerns of slow ramp-up of specialty portfolio and likely negative outcome in ensuing US DOJ (Department of Justice) case for generic drug price fixing have been factored in the current valuations.
Resolution of generic drug price fixing case by Sandoz with US DOJ indicates a possible resolution by Sun Pharma (including Taro) which could be positive in our view as it would remove a major overhang from the stock. The company continues to focus on cost rationalisation measures and improving its product mix. Strong performance in India business and stability in base business margin despite slow ramp-up in specialty portfolio are likely to continue.
Upgrade to ‘buy’ with revised target price of ₹478/share (earlier ₹445/share).
Key downside risks are: Regulatory hurdles and adverse outcome on generic price fixing case with US DOJ with significant penalty.
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