Analyst Research Report Snapshot

Title:

Sun Pharmaceuticals (SUNP) - Qtr. Update - Dated - November 14, 2013

Price:

$46.00

Provider:

Axis Capital Limited

Date:

14 Nov 2013

Pages:

5

Type:

AcrobatPDF

Companies referenced:

SUN.NS

Available for Immediate Download
Summary:

Sun Pharma’s Q2 revenue (up 58% YoY at Rs 42 bn) was above estimates (our: Rs 36 bn; Street: Rs 38 bn). This was driven by: (a) volume growth/ price hikes at Taro (revenue was up 28% to USD 205 mn vs. estimated USD 160 mn), (b) 17% growth in India formulation (our estimate: 12%; despite pricing policy implementation and trade unrest). EBITDA margin at 43.6% (flat YoY/ QoQ) was in line with estimates. Consequently, adj. PAT (Rs 13.6 bn; up 51% YoY) was much ahead of estimates (our: Rs 12 bn; Street: Rs 13 bn). Raise estimates, maintain BUY (10% upside from CMP) We increase our FY14E/FY15E EPS by 11%/13% to factor in growth at Taro. Maintain BUY with revised TP of Rs 661 (23x FY15E EPS) vs. Rs 585 earlier. At CMP of Rs 600, the stock trades at 23.5x FY14E EPS of Rs 25.5 and 20.8x FY15E EPS of Rs 28.8. Upgrades FY14 revenue growth guidance to 25% (constant currency) from 18-20% earlier (our estimate 35% in INR terms) including full year impact of URL and Dusa consolidation and any pricing impact; excludes any potential M&A  URL portfolio has huge upside in terms of ramping-up volumes and re-introduction of discontinued products  With focus on increasing installations of BLU devices and increasing usage per doctor, we believe Dusa can deliver strong growth over next 5 years. Expanding indications would provide further upside  Base business to be led by strong ANDA pipeline (130 ANDAs pending approval)  We expect Sun Pharma to deliver 19% growth in India formulations despite new pricing policy. This would be led by volume gains and potential price hikes in select products (allowed under new pricing policy) Risks: (a) Though we now factor in growth in Taro revenue, we cannot rule out risk of price erosion in key products, (b) entry of competition in Doxycycline Hyclate/ Doxil, and (c) delay in re-introduction of URL products. Triggers: (a) Approval of NDA for SPARC/ Taro, and (b) faster ramp-up of URL portfolio. Regards, Deepak Khetan (VP – Life Sciences) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1132

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