Sun Pharma - Nirmal Bang Institutional

Sun Pharmaceutical Industries (SPIL) 1QFY14 adjusted earnings (for one-time penalty of Rs25.1bn related to generic Protonix) were boosted by a lower tax rate, in what was an otherwise in-line performance at the operating level. Even as Taro's performance weakened due to competition in its flagship dermatology product, Nystatin combination drug, SPIL continued to get a boost from its large US pipeline as well as through price hikes of the products with limited competition or in which there is shortage in the US. We have factored in the 180-day marketing exclusivity in respect of the launch of generic Prandin (anti-diabetec drug), a lower tax rate of 15% in line with the management's guidance and our revised house call on the rupee-US dollar rate of s58.5/Rs57.5/$ for FY14E/FY15E in our numbers, owing to which our FY14/FY15 EPS estimates stand revised upwards by 15%/13%, respectively.

We have upgraded the stock to Buy from Hold with a revised target price of Rs589, based on 25xFY15E (from 24x earlier) revised EPS of Rs23.6 (from Rs21.6 earlier).

Source : Equity Bulls

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