Sun Pharma’s reported sales of Rs 76.3 billion (in line with our est.), along with higher than expected EBITDA margin of 33% (vs. our est. of 32.4%) and PAT of Rs 17.1 billion (vs Rs 14.2 billion in Q3FY16). However, on account of the management’s lower top line and higher R&D expenses guidance for FY17, we are making a downward revision to our FY17E EPS by 6% (partially offset by lower tax guidance).
US business, accounting for 52% of total sales, grew by 28% y-o-y to Rs 39 billion in Q4FY16, resulting in overall revenue growth of 24% y-o-y for the quarter. SUNP had launched generic Gleevec in Feb-16 in the US under 180 days exclusivity. Being the sole generic player in the market, the company has generated sales of close to $110 million-$115 million from the product. Following management’s latest FY17 top line growth guidance of 8-10%, we have lowered our EPS estimates by 6%/2% for FY17/18, respectively. However, we still believe that SUNP is the best pick among its Indian large cap peers, with the company successfully moving into the specialty business, which will drive its profitability as well as sustainability of cash flow in the future. We maintain Buy rating with a revised TP of Rs 925, based on 24x FY18E, which is at 10-15% premium to its peers.