Sun Pharma - Cutting Estimates - Motilal Oswal

SUN PHARMA - 3QFY11 Concall: Raises FY11 sales growth guidance to 42%; Taro consolidation to hit profitability; Cutting estimates

Sun's 3QFY11 performance was better than our estimates and was driven mainly by domestic formulation revenues (up 20.2%) and Taro sales growth of 22.7%.

The main disappointment was lower sales for Caraco which were partly impacted by chargeback related to stoppage of generic Protonix sales in US

Reported PAT (incl one-offs) at Rs3.5b up 3.3% YoY was better than our estimates. Excluding one-offs, adjusted PAT is estimated at Rs3.06b up 19% YoY.

We have cut our FY12E and FY13E consolidated EPS estimates by 2.6% and 6% respectively, mainly to take into account Taro's lower profitability.

We expect EPS of Rs13.2 for FY11E (up 44% partly due to Taro consolidation), Rs16 for FY12E (up 21%) and Rs18.8 for FY13E (up 9%) excluding one-off upsides. The stock is valued at 32.8x FY11E, 27.1x FY12E and 23x FY13E core earnings. We have a Buy rating on the stock with a target price of Rs475 as we expect earnings growth to improve post the expected improvement in Taro R&D productivity and resolution of Caraco's problems.

Source : Equity Bulls

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