Maintain 'buy' on Sun Pharma – TP hiked to Rs.808 - Geojit BNP Paribas

- Target price has been hiked to Rs.808 from the earlier TP of Rs.757 as the valuation has been rolled over to September 2013 from March 2013.

- The company had provided one time provision of USD106 million in 2QFY13 related to the potential liability arising out of the generic Protonix litigation with Wyeth.

- After adjusting this, the PAT has beaten market estimates driven by stronger EBITDA margin and Taro margin at 51%.

- The company has raised its FY13 sales growth guidance to 30-32% from 18-20%. Taro reported 40% sales growth qoq in 1Q13 driven by price increases in key products. This slowed to 17% in 2Q13 with marginal decline in volumes. Expect a slower growth rate for Taro as the base effect kicks in. However, sales growth momentum is expected to continue in India and US and this will drive performance.

- EPS estimates for FY13 is maintained but cut it by 6.6% for FY14 as it seems that sales/EBITDA margin may come down for Taro.

- Risks to the target price are delay in key US FDA approvals and greater than estimated decline in Taro margins.

- Sun has proposed acquiring US-based Dusa Pharma for USD230 million. Dusa is a derma company with technical capabilities in photodynamic skin treatments. It sells two branded products in the US: Levulan, a leading patented product for treating actinic kerotoses and sales of USD43m in CY11. Sun believes Levulan and other products under development hold significant potential in the US and other global markets.

Source : Equity Bulls

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