KR Choksey Suggests Buy This Large Cap Pharma Stock, Sees 18% Potential Upside

KR Choksey has placed a buy call on the stock of Sun Pharmaceutical Industries Ltd. (Sun Pharma) for a target price of Rs 1,114 per share. The brokerage, considering the Current Market Price and the target price, sees potential gains of around 18% in 12 months. It is a large cap pharma sector company having a market capitalisation of Rs 2,27,756 crore.

Sun Pharmaceutical Industries Limited, is the largest Pharmaceutical company from India (AIOCD AWACS with IPM share of 8.5%, June 22), the 4th largest specialty generic company globally, and the 3rd largest generic pharma company in the US. The company's global specialty products sales (over 12 specialty products) now account for 13.8% of total revenue vs. 11.3% in Q1FY22 and 14.8% in Q4FY22.

Stock Outlook & Returns

Sun Pharma opened today at Rs 955.70 per share, currently trading at Rs 947.50 per share, 0.32% up from its previous close. The stock's 52 week low is Rs 733.70 and the 52 week high is Rs 967.85, respectively.

It gave 5.64% positive return in a week, and 8.99% in one month. It gave 14.27% positive returns in the past 3 months, whereas, in the past 1 year, it gave 13.91% positive returns. Over the past 3 years, it gave 145.5% multibagger return, and 83% positive return in the past 5 years.

Strong growth visible in global specialty revenue

The global specialty revenue was at USD 191.0 mn (INR 14,739 mn, 13.8% of operating revenue), up 29.1% YoY in Q1FY23, driven by Ilumya, Cequa, Odomzo, and Winlevi's performance. Specialty comprises 30.0% of the US revenue now. In the US, patient flow and frequency of MRs to doctors are still not at preCOVID-19 levels. However, Winlevi is ramping up with 10,000 doctors prescribing it in the US while the generic business continues to grow, driven by new launches, market share gains, and better supply chain management. In Q1FY23, the company launched 2 products in the US.

Strong pipeline of generic and novel products

The company's generic pipeline comprises of 89 ANDAs and 13 NDAs, awaiting approval as of Q1FY23. The company has 4 molecules in the specialty pipeline. For Q1FY23, the company launched 22 new products in the US vs. 11 new products in India. The company continues to witness growth in chronic and sub-chronic therapy segments in India, as it continues to outperform the IPM growth, leading to market share gains. Expansion of field force is on track in India and the company has attained 90.0% of the target field force expansion, so far. The focus is on market share gain and improving overall productivity in India.

KR Choksey suggests "buy" for a target price of Rs 1,114 per share

The company has been experiencing healthy traction in the US revenue over the last 4 quarters. Specialty business constitutes 30.0% of the US and 13.8% of the overall revenue for Sun Pharma as of Q1FY23. The specialty revenue growth has been impressive at an average of ~ 30.0% YoY over the last 4 quarters. The company has another 4 NDA molecules undergoing trials. We continue to expect the company to post a 10.6% and 11.2% CAGR growth in its revenue and adjusted net income, respectively, over FY22-FY24E. The stock is currently trading at 27.3x/23.7x of our estimated FY23E/EFY24E EPS. "We apply a 28.0x multiple on FY24E EPS of INR 39.8 and arrive at a Target Price (TP) of INR 1,114 and maintain the BUY recommendation, as the upside potential is 18.0% from its CMP of INR 945," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of KR Choksey. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.