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Sun Pharmaceutical
Growth guidance maintained despite lower sales
Mixed results: lower costs aid margin (33.5%, up from
30.3% in Q4 FY11) offsetting lower sales
20% yoy net sales growth led by Taro; ex-Taro sales
declined 18% yoy against estimated 8% decline.
Management reiterates revenue guidance of 28-30%
(we estimate 25%) for FY12; growth is challenging, in
our view.
We marginally lower FY12/13 revenue growth estimates
and revise EPS by +2% for FY12 and -5% for FY13.
Maintain IN-LINE with PT of Rs490 (Rs475 earlier).
Mixed results. Sun’s Q1 FY12 results were mixed, with
higher margins offsetting lower sales. Net sales (net of VAT)
grew 20% yoy to Rs16.6bn against our estimate of
Rs17.6bn. Lower fixed costs aided margins with EBITDA of
Rs5.5bn (33.5% margin, 11% yoy decline) versus our
estimate of Rs5.4bn. Net profit was in line, at Rs5bn, with
lower taxes (due to tax credits in Taro) offsetting higher
minorities outlay.
Ex-Taro sales declines 18%. Ex-Taro, organic sales
declined 18% yoy on a net basis, against our estimate of
8%. However, domestic formulations were impacted by
Rs290m of discontinued contract manufacturing operations,
not in our estimate. We also estimate that ex-Taro US
business (after adjusting for oxaliplatin sales of Q1 FY11)
have grown, primarily led by new products including generic
docetaxel and sumatriptan injectibles during the quarter.
Moreover, we estimate ROW sales having grown 130% yoy
during the quarter, aided by a low base of Q1 FY11
operations due to inventory adjustments.
Guidance reiterated but will be challenging.
Management reiterated guidance of 28-30% net sales
growth in FY12 (including Taro), which would be
challenging, in our view. We have marginally revised
downward our revenue expectation by 1-2% for FY12/13,
with implied growth of 25% in FY12 and organic growth of
15% in FY12 (against 20% earlier), changing our reported
EPS by 2% and -5% for FY12/13, respectively.
Maintain IN-LINE. We maintain IN-LINE rating with a
revised SOTP of Rs490 (Rs475 earlier). Current valuations
leave little room for execution risks on Taro, which we
believe is vulnerable to competition due to product
concentration and weak pipeline.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sun Pharmaceutical
Growth guidance maintained despite lower sales
Mixed results: lower costs aid margin (33.5%, up from
30.3% in Q4 FY11) offsetting lower sales
20% yoy net sales growth led by Taro; ex-Taro sales
declined 18% yoy against estimated 8% decline.
Management reiterates revenue guidance of 28-30%
(we estimate 25%) for FY12; growth is challenging, in
our view.
We marginally lower FY12/13 revenue growth estimates
and revise EPS by +2% for FY12 and -5% for FY13.
Maintain IN-LINE with PT of Rs490 (Rs475 earlier).
Mixed results. Sun’s Q1 FY12 results were mixed, with
higher margins offsetting lower sales. Net sales (net of VAT)
grew 20% yoy to Rs16.6bn against our estimate of
Rs17.6bn. Lower fixed costs aided margins with EBITDA of
Rs5.5bn (33.5% margin, 11% yoy decline) versus our
estimate of Rs5.4bn. Net profit was in line, at Rs5bn, with
lower taxes (due to tax credits in Taro) offsetting higher
minorities outlay.
Ex-Taro sales declines 18%. Ex-Taro, organic sales
declined 18% yoy on a net basis, against our estimate of
8%. However, domestic formulations were impacted by
Rs290m of discontinued contract manufacturing operations,
not in our estimate. We also estimate that ex-Taro US
business (after adjusting for oxaliplatin sales of Q1 FY11)
have grown, primarily led by new products including generic
docetaxel and sumatriptan injectibles during the quarter.
Moreover, we estimate ROW sales having grown 130% yoy
during the quarter, aided by a low base of Q1 FY11
operations due to inventory adjustments.
Guidance reiterated but will be challenging.
Management reiterated guidance of 28-30% net sales
growth in FY12 (including Taro), which would be
challenging, in our view. We have marginally revised
downward our revenue expectation by 1-2% for FY12/13,
with implied growth of 25% in FY12 and organic growth of
15% in FY12 (against 20% earlier), changing our reported
EPS by 2% and -5% for FY12/13, respectively.
Maintain IN-LINE. We maintain IN-LINE rating with a
revised SOTP of Rs490 (Rs475 earlier). Current valuations
leave little room for execution risks on Taro, which we
believe is vulnerable to competition due to product
concentration and weak pipeline.
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