"Over the last 9 months, Sun Pharma
has addressed quite a few concerns which have created an unwarranted wide price-value disconnect in the stock, most notably, the lifting of the overhang related to the drug price-fixing litigation (with the final settlement amount being significantly lower at USD 206 mn than some of the exaggerated estimates) and improvement in the balance sheet quality with debt reduction of over USD 300 mn in April-September period (H1FY21)," analysts at JM Financial Institutional Equities said in a company update.
The brokerage firm said it sees multiple drivers of a sustained earnings momentum including Sun's specialty portfolio now reverting to its normalized growth trajectory, uptick in prescriptions across Taro's key products in the US, and further consolidation of Sun's leadership position in the domestic market.
Analysts at Emkay Global Financial Services, on the other hand, expect specialty sales CAGR of around 14 per cent (FY20-23E) mainly driven by Ilumya and Cequa, partially offset by generic competition in Absorica. "This will drive sustainable EBITDA (earnings before interest, taxes, depreciation, and amortization) margin expansion in the medium term despite continued investments in specialty R&D and marketing," the brokerage firm said in Q2FY21 result update.
While the management indicated that reduction in sales and promotional expenses is not structural, the brokerage firm believes that EBITDA margin will remain around 25 per cent in the near term as other expenses are expected to remain moderate in Q3 and possibly in Q4.
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