MOSL: SUN PHARMA (Buy)-Recent Halol 483 - Not a show stopper
SUN PHARMA: Recent Halol 483 - Not a show stopper
(SUNP IN, Mkt Cap USD22.2b, CMP INR664, TP INR790, 19% Upside, Buy)
- US FDA recently conducted an inspection at SUNP's Halol plant from 27-31 August and issued Form-483 with six observations.
- We believe the observations are resolvable and should not impact existing business and/or new approvals, pertaining to SUNP.
- We raise EPS estimate by 1%/3% for FY19/FY20 to factor in the favorable currency movement.
- We expect a premium for SUNP to further expand from 25% to 35%, compared to an industry average of 20x 12M Forward Earnings on the back of increasing share of specialty portfolio. SUNP is the only Indian-listed entity, which is progressing well in the specialty portfolio. We believe, the incremental generics business from new launches should be higher than base business erosion, and sustained outperformance in the domestic formulation business should also support multiple re-rating.
- Accordingly, we raise our P/E multiple to 27x (from 25x earlier) and revise our price target to INR790 (from INR700 earlier); reiterate a Buy.
Sun Pharmaceutical and its subsidiaries are principally engaged in developing, manufacturing and marketing generic pharmaceutical products and bulk drugs. Co.'s products are mainly for the following therapy areas: psychiatrists, neurologists, gastroenterologists, diabetologists, chest physicians, consultant physicians, orthopedics, oncologists, gynecologists, ophthalmologists and cardiologists. Generic names of three principal products of Co. is Pentoxifyline, Pentoparzole Sodium, and Metformin Hydrochloride. Co.'s business can be divided into four segments: Indian branded generics, U.S. generics, international branded generics (ROW) and Active Pharmaceutical Ingredients (API).
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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