Sun Pharma Q4 Results Review - US/EM/ROW Drive Earnings For The Quarter: Motilal Oswal

Launched g-Revlimid in 4QFY23; specialty sales strengthen further

• Sun Pharmaceutical and Industries (SUNP) delivered operational miss for 4QFY23 performance (on ex-milestone income basis), led by higher-thanexpected operational cost. There was a sharp uptick in gross margin, (YoY/QoQ) due to increased share of higher margin products. However, this benefit was offset to some extent due to increased promotional spent in the branded segment.

• We reduce our earnings estimate by 4% each for FY24/FY25 to factor in a) elevated sales/distribution cost, and b) higher R&D spent related to specialty products. We continue to SUNP at 25x 12M forward earnings to arrive at a price target of INR1,160.

• SUNP remains in good stead to scale up business related to specialty portfolio. It is also making efforts to introduce new products and develop existing products for alternate indications. While higher R&D spent may affect near-term margins, it would strengthen SUNP’s positioning in innovative products offerings on successful clinical outcome. Niche launches such as like that of g-Revlimid would enable better sales/profitability prospects in the US generics segment. Sustained strong brand franchise/enhanced marketing efforts would also drive better-than-industry growth in the branded generics segment. We reiterate our BUY rating on the stock.

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