The shares of the company opened at Rs 836 per share, currently trading at Rs 839.80 per share. The previous close was Rs 838.70 per share. The recorded 52-week low is Rs 664.20 per share, while the 52-week high recorded is Rs 967.05 per share.
The stock has gained almost 24.43% in past 1 year. However, it has not given positive returns in the past 1 and 3 months. In the past 1 month, it slid 5.39% and 8.71% in the past 3 months, respectively. The stock has given promising returns on 3 and 5 years of investment, nearly 109.61% in 3 years, and 5124% in 5 years, respectively. In the past one week, the stock has witnessed a positive gain of 1.89%.
According to the Rs 1000 per share, the brokerage’s estimated target price and the current market price of Rs 839.80 per share, the stock sees a jump in its share price by 20%.
Expected traction across specialty Business to aid US sales growth
Revenue from the US business grew strongly by 12% y-o-y despite price erosion seen across the industry in the US, aided by strong growth in the specialty segment sales which grew by 42% y-o-y in FY22. The strong performance of Illumya has been the key growth driver for speciality segment, well supported by other products. Going ahead growth in existing products, a strong product pipeline, expanding geographic presence and a pick-up in new launches are likely to offset the impact of reduced Absorica sales, thus making the speciality segment a key growth driver.
India business to outpace the industry growth
The India business continued its strong growth trajectory in FY22 with the revenues growing by 23% y-o-y supported by a strong performance of Chronics as well as acute therapies. The management expects the strong growth traction to sustain backed by a sturdy new product pipeline with the company launching 77 new products in FY22 which would ramp up going ahead. Overall, management sees domestic formulations business to grow strongly going ahead, backed by new product launches, improving field force productivity and expansion, and expected traction in the existing business. Collectively, basis the above the company expects to outpace the industry growth.
The management had guided for a high single-digit or low double-digit growth in revenue for FY2023 backed by growth across segments, with specialty segment and India business likely to be a key growth driver. Considering the expected traction in the specialty segment and strong outlook for the India business the guidance seems achievable. While on the cost front the elevated cost pressures are expected to normalize gradually and thus could aid OPM expansion with the margins expected to expand 110 bps over FY22 to FY24E.
Buy for a target price of Rs 1000 per share
According to the brokerage, “Sun Pharma’s key geographies, US and India, are witnessing improved traction. Growth in the US business would be driven by likely pick up in the specialty business coupled with traction from new product launches and steady growth in US generics, while strong growth across therapies and field force expansion would drive India sales.”
The brokerage said, “At the CMP, the stock trades at 23.9x/21.1x its FY2023E/ FY2024E EPS, respectively, which is below the historical long-term average multiple. Further, the stock price has corrected by ~ 12% in the past two months and the valuations are now attractive. Improved growth prospects across businesses and a healthy balance sheet position would be key positives. We re-iterate the Buy recommendation on the stock with an unchanged price target of Rs. 1,000.”
Brokerage highlighted 3 key Risks, these risks are 1) Regulatory compliance risk including delay in product approvals; 2) Currency risk; and 3) Delay in the resolution of USFDA observations at Halol plant.
About – Sun Pharmaceuticals Industries Ltd
Sun Pharmaceutical Industries Ltd. (Sun Pharma) is the fourth largest specialty generic pharmaceutical company in the world with global revenues of over US$ 4.5 billion. The company is engaged in the business of manufacturing, developing and marketing a wide range of branded and generic formulations and Active Pharma Ingredients (APIs). Supported by more than 40 manufacturing facilities, the company provide high-quality, affordable medicines, trusted by healthcare professionals and patients, to more than 100 countries across the globe. The company and its subsidiaries have various manufacturing facilities spread across the world with trading and other incidental and related activities extending to the global market.