Buy This Large Pharma Stock For Rs. 1100 Target Price, Strong Q1 Beat, API Sales Up 16.3%: Motilal Oswal

Top brokerage firm Motilal Oswal suggests investors buying the stocks of Sun Pharma. The company's API sales increased by 16.3% YoY to Rs. 6b in 1QFY23, while gross margin increased marginally by 15bp YoY to 73.9% in 1QFY23.

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of Sun Pharma is Rs. 944. Motilal Oswal has estimated a Target Price for the stock at Rs. 1100. This stock has the potential to give a 17% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 220,378 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 944
Target Price	Rs. 1100
Potential 1 year return	17.00%
52 week high share price	Rs. 967.05
52 week low share price	Rs. 733.70

The company's sales increased by 10% YoY to Rs. 106b in 1QFY23, while EM/US sales grew 12.6%/11% YoY to US$ 245m/ US$ 420m. Excluding the sales of Covid-related products in 1QFY22, the YoY growth would have been 13% in 1QFY23. Sales from RoW grew 2% YoY to US$ 190m. EBITDA was stable YoY at Rs. 26b Sun Pharma clocked a forex gain of Rs. 1.5b in 1QFY23.

However, the EBITDA margin contracted by 320bp YoY to 24.6%, on higher other expenses/employee cost, but was partially offset by lower R&D spend as a percentage of sales. Also, adjusted PAT dipped 4% YoY to Rs. 19b.

Motilal Oswal: Advantages Of This Stock

Maintaining the buy rating for the stock, the brokerage firm said, "Sun Pharma delivered a strong beat on 1QFY23 earnings, led by broad based growth across business segments (US/Domestic Formulation (DF)/emerging markets (EMs)/RoW). While lower R&D spends has further enhanced margin in 1QFY23. However, the postponement of clinical trials would delay in obtaining potential approvals/subsequent commercial benefit from new chemical entity (NCE) assets."

"We have raised our FY23/FY24 EPS estimate by 6%/4%, factoring in steady industry outperformance in the Branded Generics segment and lower R&D spends. We continue to value Sun Pharma at 25x 12M forward earnings to arrive at our target price of Rs. 1,100. We remain positive on Sun Pharma on the back of sustained scale-up in the Specialty portfolio, robust franchise building in the Branded Generics portfolio, and healthy ANDA pipeline awaiting approval. We reiterate our Buy rating," Motilal Oswal added.

Company portfolio: Sun Pharma

Sun Pharmaceutical Industries Ltd. (Sun Pharma) is the 4th largest specialty generic pharmaceutical company in the world with global revenues of over US$ 4.5 billion. Supported by more than 40 manufacturing facilities, they supply medicines to more than 100 countries globally. They manufacture pharmaceutical formulations like generics, branded generics, specialty, complex or difficult to make technology-intensive products, over-the-counter (OTC), antiretrovirals (ARVs), Active Pharmaceutical Ingredients (APIs) and Intermediates. In the US, they are among the top 10 generic pharmaceutical companies, and it is the largest Indian company in emerging markets with a presence in over 80 markets. They are present across all major markets in Western Europe, Canada, Australia, New Zealand, Japan and China among others.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.