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Sun Pharmaceutical Industries (SUN.BO) Rs445.15
Equity Research
First Take: 4Q below GS/Street on revenue and EBIT; maintain Sell
News
Sun Pharmaceuticals posted 4QFY11 revenues of Rs14.63bn (-7.9%/ -4.2%
vs. GS/Bloomberg consensus estimates) and EBIT of Rs3.95bn (-12.9%/-
7.4% vs. GS/consensus estimates). Meanwhile net income of Rs4.42bn was
above GS/consensus estimates by 8.7%/24.0%, due to higher nonoperating income and lower tax rate. EBIT margin continued to see
pressure at 27.0% (down 700 bp yoy and below GSe by 160 bp, but in line
with the Street). Sun also announced that it has resolved the February 2009
warning letter from the US FDA relating to the Taro’s Canadian
manufacturing facility.
Analysis
1) Domestic sales of Rs6.2bn came in 7.3% below our estimate, mainly on
the formulation business (-8.3% vs. GSe) while Bulk/API showed
strength (+24.1% vs. GSe); 2) Export sales of Rs8.95bn also showed
weakness (-3.4% vs. GSe), where formulation of Rs7.76bn was -5.5% vs.
GSe. The export Bulk/API business continued to do well (+15.5% vs.
GSe); 3) COGS was significantly below GSe but was offset by higher SG&A
expense; 4) Sun posted non-operating income of Rs1.10bn, significantly
higher than GSe; and 5) Lower tax rate of 0.4% (vs. 6.4% GSe), which along
with the higher non-operating income led to the bottom-line beat.
Implications
Our estimates and price target are under review, pending the conference
call.
We seek more clarification on: 1) Taro opportunites, including on pricing,
product sales, and R&D productivity; 2) Update on remediation effort at
Caraco’s facility and possible resolution with the US FDA; and 3) Sun’s
strategy in the US, especially acquisition plans to further consolidate its
business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sun Pharmaceutical Industries (SUN.BO) Rs445.15
Equity Research
First Take: 4Q below GS/Street on revenue and EBIT; maintain Sell
News
Sun Pharmaceuticals posted 4QFY11 revenues of Rs14.63bn (-7.9%/ -4.2%
vs. GS/Bloomberg consensus estimates) and EBIT of Rs3.95bn (-12.9%/-
7.4% vs. GS/consensus estimates). Meanwhile net income of Rs4.42bn was
above GS/consensus estimates by 8.7%/24.0%, due to higher nonoperating income and lower tax rate. EBIT margin continued to see
pressure at 27.0% (down 700 bp yoy and below GSe by 160 bp, but in line
with the Street). Sun also announced that it has resolved the February 2009
warning letter from the US FDA relating to the Taro’s Canadian
manufacturing facility.
Analysis
1) Domestic sales of Rs6.2bn came in 7.3% below our estimate, mainly on
the formulation business (-8.3% vs. GSe) while Bulk/API showed
strength (+24.1% vs. GSe); 2) Export sales of Rs8.95bn also showed
weakness (-3.4% vs. GSe), where formulation of Rs7.76bn was -5.5% vs.
GSe. The export Bulk/API business continued to do well (+15.5% vs.
GSe); 3) COGS was significantly below GSe but was offset by higher SG&A
expense; 4) Sun posted non-operating income of Rs1.10bn, significantly
higher than GSe; and 5) Lower tax rate of 0.4% (vs. 6.4% GSe), which along
with the higher non-operating income led to the bottom-line beat.
Implications
Our estimates and price target are under review, pending the conference
call.
We seek more clarification on: 1) Taro opportunites, including on pricing,
product sales, and R&D productivity; 2) Update on remediation effort at
Caraco’s facility and possible resolution with the US FDA; and 3) Sun’s
strategy in the US, especially acquisition plans to further consolidate its
business.
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