Reiterate 'buy' on Sun Pharma - TP hiked to Rs.868 - Geojit BNP Paribas Financial Services

- Buy rating maintained on Sun Pharma with an increased target price of Rs.868 as against the earlier target price of Rs.830.

- Company's 3QFY13 result is better than analysts' estimates.

- The beat was entirely operational, driven by Taro sales in the US (average price hike of 15% in 3Q) and Lipodox, which propelled EBITDA margin to 44.7% against analysts' estimate of 42%.

- The underlying sales growth trends in India and emerging markets remained strong.

- Sun and Taro Pharmaceuticals (US) ended their merger proposal recently. Sun Pharma has 66% stake in Taro had offered USD39.5 per share to buy out the remaining stake in Taro.

- The termination may not impact Taro's business but Sun Pharma cannot fully exploit synergies with Taro. Hence, the termination is viewed as a long term set back.

- In view of stronger 3QFY13 result and recent acquisition of Dusa Pharma and URL Pharma and adding gDoxil sales to the US sales numbers, EPS estimates for FY13, FY14 and FY15 have been raised 8%, 15% and 8% respectively. Target price has also been hiked to Rs.868 from Rs.830.

- Key risks are approval delays from FDA, sales decline or margin pressure for Taro.

- Sun Pharma's US portfolio is shaping up well with good mix of commodity generics, specialty products with offerings across various technology platforms. The stock performance may exceed our target.

Source : Equity Bulls

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