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UBS Investment Research
Sun Pharma
Q2FY11: Effexor XR drives a strong qtr
Q1FY11 Sales: 13.9bn (+25%yoy) driven by Effexor XR, UBS-e: Rs 12bn
Sales grew strongly driven by strong domestic formulation sales (+7%qoq) and we
believe, higher than expected shipments of Effexor XR. Domestic formulations
grew 36%YoY while US sales were US$98mn excl. Taro driven by Effexor XR
(venlafaxine) tablets. Sun is consolidating Taro from this qtr (for ~10days).
EBITDA: Rs 4.67bn(-24%QoQ), Net profit: Rs5.03bn(-11%QoQ)
Q2FY11 EBITDA margin stood at 34% as raw material cost (%age of net sales)
increased 370bps qoq to 27.7% while R&D cost stood at only 5.6% vs co.
guidance of 7%-8% for the year. Staff cost and other expenses increased we
believe partly impacted by consolidation of Taro Pharma. However, higher interest
income and non op. income drove PAT to Rs 5.03bn (+11%YoY).
Call to provide clarity on Taro & strategy going forward
Co. will hold a call at 10 AM India time. The Primary dial in number is: +91 22
3065 0088. We look to get clarity on impact of Taro to this quarter nos. and mgmt.
assessment of current shape of Taro business and strategy going forward.
Valuation: Maintain Neutral, PT Rs 2,250
We derive our price target using DCF-based methodology, explicitly forecasting
long-term valuation drivers using UBS’s VCAM tool and using a WACC of 11%.
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