First Read: Sun Pharma "Steady Q4; Innovative segment sales to drive growth"

研报英文原文证据摘录

First Read: Sun Pharma "Steady Q4; Innovative segment sales to drive growth"

Forecast returns

Forecast price appreciation 19.2%

Forecast dividend yield 0.8%

Forecast stock return 20.0%

Market return assumption 11.8%

Forecast excess return 8.2%

Company Description

Sun Pharma is India's largest generic pharma company and has a presence in over 80

emerging markets, and key developed markets in Western Europe, Canada, Japan, Australia

and New Zealand. It markets a specialty (patented) portfolio in the US, focused on

dermatology, ophthalmology and oncology.

Valuation Method and Risk Statement

Sector risk - The key risks for India pharma sector where most companies get about 70-80%

of profits from US and India are: (1) a sharp increase in Jan Aushadhi stores can take-off 1-2%

from the growth of India Pharma market on a base of 8% CAGR; (2) higher participation of

large companies in trade generic market can further impact growth of branded generics in

India; and (3) an increase in the pace of decline of the US generic market with increasing new

applications approval rate from the US FDA and slowing down of patent expiries as a larger

part of incremental branded revenues in the US and biologics.

Our valuation methodology is based on DCF, where we explicitly forecast for the next 10

years, then use terminal growth of 7.0%; to discount the cash flow, we use WACC of 10%.

Key company-specific risks include: 1) delays in the launch of Deuruxolitinib due to ongoing

litigation with Incyte Pharma; 2) delays in phase 3 trial results for Ilumya or adverse trial results

for psoriatic arthritis; 3) delays in resolutions of import alerts and warning letters at multiple

Sun Pharma facilities; and 4) R&D spending staying high, at 7-8% of revenue in the US, if Sun