Sun Pharmaceutical Industries - Strong results again; guidance revised upwards; Maintain 'REDUCE' - TP Rs534 - PINC Research

Q3FY12 Result Review - Sun Pharmaceutical Industries

Strong results again; guidance revised upwards

Sun Pharma reported strong Q3FY12 numbers, which were ahead of our and street estimates, backed by the robust growth across the US markets and favourable currency movement. The domestic formulations segment, excluding the discontinued third party business grew by 17% YoY. On back of robust US sales and favourable currency, the company reported EBITDA margins of 44.9%. As a result, the net profit came in at Rs6.6bn which increased by 91% YoY. In accordance to the robust growth in business, the company has revised its FY12 revenue growth guidance upwards to 32-34% (earlier 28-30%).

- Robust revenue growth attributed to Taro and US segment
- Operating Margins boosted by US sales and favourable currency

VALUATION AND RECOMMENDATION

We have primarily revised our FY12 and FY13 sales estimates upward by 6-7% and earnings estimates upwards by 8-5% to factor in higher Taro sales and subsequent improvement in margins. We maintain 'REDUCE' on the stock with a revised SOTP target price of Rs534 valuing the base business at Rs526 (22x one year forward earnings) and Rs8 per share for the P-IV/ limited competition opportunities. The stock is currently trading at 25.8x FY12E and 23.1x FY13E recurring earnings factoring most of the positive upsides. The key upside risk to our estimates would be resolution of USFDA issue at Caraco.

Source : Equity Bulls

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