EUR 120.00 For Business Accounts Only

MOSL: SUN PHARMA (Buy)-Better performance in India/ROW offset by EM/US

SUN PHARMA: Better performance in India/ROW offset by EM/US

(SUNP IN, Mkt Cap USD14.5b, CMP INR431, TP INR510, 18% Upside, Buy)

 

WIP for improving specialty portfolio execution; MR strength in DF rising

• SUNP gradually enhanced traction in its specialty portfolio with some support of seasonality in the quarter. It also intends to fortify MR strength and increase penetration to aid growth in domestic formulations (DF).
• We lower our FY20/FY21/FY22E EPS estimates by 4%/4%/2% to factor in the delayed ANDA approvals, reduced tender business in emerging markets (EMs) and the increase in R&D spends over the next 12-24 months. We believe that RoE at 9% has bottomed out in FY19 and would revive on the back of increased traction in the specialty portfolio, new launches in US generics and in-line industry growth in the DF segment. Maintain 

In-line operational performance

• 3QFY20 sales were up 5% YoY to INR80.4b (in-line), led by India sales growth of 18% YoY to INR74b (31% of sales) and RoW sales growth of 24% YoY to USD155m (14% of sales). Integration of the acquired Pola Pharma (Japan) since Jan’19 along with organic growth led to the improved sales.
• US sales (31% of total sales) were down 3% YoY and continue to face competition heat affecting overall growth at USD350m. Taro posted 3QFY20 sales of USD148m, down 16% YoY.