Sun Pharma - Continues to shine - Ambit

Sun Pharma's 1QFY14 results exceeded our expectations mainly due to the higher-than-expected growth in the US (ex-Taro) and the domestic business. Despite significantly higher employee costs (due to consolidation of DUSA and URL), EBITDA margins of 44.3% were 295bps higher than our estimates. Lower-than-expected tax rates and higher-than-expected other income resulted in PAT of Rs12.4bn, up 56% YoY and 35% ahead of our expectations.

We believe the continued expansion in the ex-Taro business including URL and DUSA, launches from Sun's extensive US product pipeline and approvals of key limited-competition products would help drive earnings growth. The management has clearly indicated that the company is open to acquisitions, but the company wants to build a franchise that is dependent on organic growth.

We marginally upgrade our earnings estimates for FY14 and FY15 and one-year forward valuation to Rs588 (vs Rs574 earlier), which implies an FY14 P/E of 29.5x and FY14 EV/EBITDA of 20.4x.

Source : Equity Bulls

Keywords