Retain 'buy' on Sun Pharma - TP Rs.830 - Geojit BNP Paribas

- 'Buy' rating on Sun Pharmaceuticals has been retained with a target price of Rs.830.

- The share price has fallen by 8% over the past one month to the range of Rs.700, in line with the decline in the BSE HC index.

- The decline is not due to any negative news flow and the fundamental outlook on the stock remains positive.

- Post the correction, Sun trades at 20 multiple of its one year forward earnings verses its three year trading average of 22 P/E. Thus, the current level offers an attractive entry point.

- It is estimated that Sun's core PAT CAGR at 15% over FY13-15. It is assumed that taro sales will remain flat over this period as fresh competition enters the market. As such, a delay in competition is an upside risk to our estimate.

- Sun is exploring acquisition opportunities but it is not dependent on inorganic growth to drive profitability.

- The stock is rated to buy with a target price of Rs.830, which offers about 19% upside from the current level.

- Key risks to this view are delays in major approvals from the US FDA, a decline in sales and greater-than-expected margin pressure for Taro.

- Key events to watch out for this year are:

a) inorganic growth opportunities on a larger scale in the US and emerging markets,
b)launch of generic Prandin in the US with limited competition,
c)news flow on the consolidation of Taro as a 100% subsidiary,
d) news flow on Protonix litigation and
e) progress of Caraco under consent decree with the FDA.

Source : Equity Bulls

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