Buy Sun Pharmaceutical Industries; target of Rs 540: ICICI Direct

ICICI Direct is bullish on Sun Pharmaceutical Industries has recommended buy rating on the stock with a target price of Rs 540 in its research report dated May 28, 2020.

ICICI Direct's research report on Sun Pharmaceutical Industries

Revenues were in line with I-direct estimates but profitability was below I-direct estimates due to lower-than-expected operational performance and a forex loss of Rs 142 crore. Q4FY20 revenues grew 14.3% YoY to Rs 8184.9 crore, mainly due to adjusted 8.2% YoY growth in India formulations to Rs 2364.8 crore (adjusted for one-time distribution change impact of ~Rs 1085 crore in Q4FY19). US business declined by 13.1% YoY to Rs 2712.9 crore due to one-time business opportunity in Q4FY19. EBITDA margins expanded 246 bps YoY to 16.7% due to lower employee and other expenditure. EBITDA grew 34.1% YoY to Rs 1363.0 crore. Adjusted net profit grew 7.3% YoY to Rs 660.5 crore. Delta vis-à-vis EBITDA was due to higher tax rate (14.4% vs -4.1% in Q4FY19) and lower other income.

Outlook

We upgrade to BUY and arrive at our new TP of Rs 540 based on 22x FY22E EPS of Rs 24.5.

For all recommendations report, click here

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