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Analyst Research Report Snapshot


Sun Pharmaceutical Industries | Q1FY14 Result Update




IndiaNivesh Securities Pvt Ltd


12 Aug 2013





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Sun Pharmaceutical Industries Limited (SPIL) | Q1FY14 Result Update Again surprises, URL acquisition favored the growth, upgrade from Hold to BUY with the target price of Rs 602. Valuations: Company’s healthy performance continued during the quarter & company has surprised positively in the last 7-8 quarters by significant margins. In FY12 & FY13 company’s growth was supported by price hike in certain products of Taro, favorable currency movement & supply of Doxil to US market. Going forward, we expect stabilization in Taro’s pricing, while volume growth should sustain & Taro would grow at 8-10% y-o-y rate in FY14E & FY15E. ANDA approval for Doxil by USFDA has cleared uncertainties for supply of the product in US market, while Johnson & Johnson is still struggling to completely resolve supply of its branded product. Current acquisition of DUSA Pharma, in our view, may take longer period to generate accretive results for the company, however we believe that URL acquisition would provide impetus to SUN’s revenue & Management has guided to gain in volume on URL front by re-launching certain products. Additionally, company has gained substantially on account of increase in prices for Doxycycline (by URL) linked with increase in demand and withdrawl by Teva & Major Pharma. Sun launched generic version of Prandin (Anti-diabetic drug from Novo Nordisk, market Size ~$200 mn) in July 2013, with 180 days exclusivity. Further, Management’s strong execution capabilities, synergizing small acquisitions, strong balance sheet & continuous free cash flow generation ability of the company justify its premium valuations. We upgrade our rating from Hold to BUY with the target price of Rs 602 (by valuing at P/E multiple to 23x of FY15E). At CMP of Rs 507, the stock is trading at P/E multiple of 22x of FY14E & 19.3x of FY15E earnings estimates.

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