Sun Pharmaceutical Industries: Prabhudas Lilladher Maintains Buy Rating, Targets Rs 1900

Sun Pharmaceutical Industries Makes Largest Acquisition to Date with Organon Deal

Sun Pharmaceutical Industries (SUNP) has made its largest acquisition to date, acquiring Organon in an all-cash deal valued at $11.75 billion. This move enables SUNP to enter the biosimilars market and expand its presence in women's health, further diversifying its portfolio of branded generics. The acquisition also provides SUNP with access to new markets, including China.

A closer look at the financials reveals that while SUNP has acquired a company of similar size, representing 30% of its value, Organon's growth profile has been muted over the last two to three years. In contrast, SUNP has maintained a growth profile of 13-15% over the same period. SUNP's management has highlighted the potential for better growth from the acquired profile through licensing deals, new line extensions, cost synergies, and tapping into new markets. However, the execution of these plans will be crucial to achieving the desired growth.

The Organon acquisition is expected to be EPS accretive from year one, with significant EPS accretion predicted for SUNP, ranging from +30% to +35% in our forecast for fiscal year 2028.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Outlook

Given SUNP's exposure to a high-growth branded generics portfolio, the company has managed to enjoy a higher multiple compared to its peers. To outperform the stock, it will be essential for SUNP to grow its acquired portfolio beyond its historical run-rate. Based on this outlook, we maintain our BUY rating for SUNP with a target price of 1900/share.