UBS has initiated coverage on Sun Pharmaceutical Industries Ltd. (SUNP: IN) with a Buy rating and a price target of INR 2,450.00.
The firm highlighted Sun Pharma's leading position among Indian pharmaceutical companies in the development of its specialty portfolio in the United States. This portfolio, which currently generates over $1 billion in revenue, is expected to see significant growth.
According to UBS, Sun Pharma's specialty revenue has the potential to more than double within the next four years.
Additionally, the specialty EBITDA margin could also see a substantial increase, potentially more than doubling. This growth is anticipated to be further supported by a tripling of the EBITDA margin of Taro, a part of Sun Pharma's group of companies. These factors together are projected to expand Sun Pharma's consolidated EBITDA margin by over 650 basis points.
The expansion in margins is expected to result in a 25% core EPS compound annual growth rate (CAGR), excluding gRevlimid, through the fiscal year 2027. UBS's EPS estimate for that period stands 10% higher than the consensus. The firm also anticipates that Sun Pharma will enhance its specialty pipeline through the acquisition of new assets, supported by a strong financial position with $2.3 billion in cash and $1.5 billion in free cash flow.
UBS also pointed to the upcoming launch of Deuruxolitinib in the next quarter as a potential catalyst for Sun Pharma. Deuruxolitinib is touted for its more efficacious profile compared to competing drugs.
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