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U p s i d e w e l l c a p t u r e d …
Sun Pharmaceutical’s Q1FY12 results were a mixed bag. Sales were
below our expectation while profits were higher. The results are not
comparable YoY due to consolidation of Taro Pharmaceuticals and higher
one-time revenues from exclusivity products in Q1FY11. Net sales
increased 19.8% YoY to | 1635.7 crore below our expectation of | 1733.4
crore due to lower growth in the domestic formulation business. EBITDA
margins declined 1166 bps YoY to 33.5% on a higher base. The decline
was still a positive surprise mainly on account of healthy margins at Taro.
Net profit was | 501 crore as against our expectation of | 438 crore due to
higher EBITDA and tax credit at Taro’s end. We maintain our HOLD rating
on the stock on the back of strong guidance and a stable outlook.
ƒ Taro profits up 118% YoY
During the quarter, Taro Pharmaceuticals’ sales increased by 14%
YoY to US$111.6 million (| 502 crore, | 45 per dollar). EBITDA
margins increased 1080 bps YoY to 30.6% due to lower R&D
expenditure. EBITDA grew 75.7% to US$34.2 million (| 153
crore@45 per dollar). Due to tax credit of US$6.6 million, net profit
stood at US$35.7 million as against US$16.4 million in the
corresponding previous period.
V a l u a t i o n
Taro’s numbers (especially profitability) were a surprise. Although there
may be some margin pressure, going ahead, the visibility has definitely
improved with clearance of the warning letter for its Canadian facility and
less than expected tweaking in the audited numbers. As far as Sun is
concerned, the resolution of issues at Caraco’s Detroit facility and it own
New Jersey facility will be keenly watched. We expect Sun to trade at
~20% premium vis-à-vis leading peers on account of a strong generic
franchise in the US, strong foothold in chronic therapies in the domestic
formulations, upbeat Taro numbers and a strong balance sheet with a
cash of close to US$1 billion. We have valued Sun at 22x FY13E EPS of |
22.5 as most of the upsides are fairly captured in the valuation. Early
resolution of issues at Caraco and New Jersey will further widen the
valuation delta.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
U p s i d e w e l l c a p t u r e d …
Sun Pharmaceutical’s Q1FY12 results were a mixed bag. Sales were
below our expectation while profits were higher. The results are not
comparable YoY due to consolidation of Taro Pharmaceuticals and higher
one-time revenues from exclusivity products in Q1FY11. Net sales
increased 19.8% YoY to | 1635.7 crore below our expectation of | 1733.4
crore due to lower growth in the domestic formulation business. EBITDA
margins declined 1166 bps YoY to 33.5% on a higher base. The decline
was still a positive surprise mainly on account of healthy margins at Taro.
Net profit was | 501 crore as against our expectation of | 438 crore due to
higher EBITDA and tax credit at Taro’s end. We maintain our HOLD rating
on the stock on the back of strong guidance and a stable outlook.
ƒ Taro profits up 118% YoY
During the quarter, Taro Pharmaceuticals’ sales increased by 14%
YoY to US$111.6 million (| 502 crore, | 45 per dollar). EBITDA
margins increased 1080 bps YoY to 30.6% due to lower R&D
expenditure. EBITDA grew 75.7% to US$34.2 million (| 153
crore@45 per dollar). Due to tax credit of US$6.6 million, net profit
stood at US$35.7 million as against US$16.4 million in the
corresponding previous period.
V a l u a t i o n
Taro’s numbers (especially profitability) were a surprise. Although there
may be some margin pressure, going ahead, the visibility has definitely
improved with clearance of the warning letter for its Canadian facility and
less than expected tweaking in the audited numbers. As far as Sun is
concerned, the resolution of issues at Caraco’s Detroit facility and it own
New Jersey facility will be keenly watched. We expect Sun to trade at
~20% premium vis-à-vis leading peers on account of a strong generic
franchise in the US, strong foothold in chronic therapies in the domestic
formulations, upbeat Taro numbers and a strong balance sheet with a
cash of close to US$1 billion. We have valued Sun at 22x FY13E EPS of |
22.5 as most of the upsides are fairly captured in the valuation. Early
resolution of issues at Caraco and New Jersey will further widen the
valuation delta.
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