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UBS Investment Research
Sun Pharma
Q 1FY12: Below UBS-e on revenue miss
Event: Q1FY12 – Sales, EBITDA below UBS-e
Sales grew 20%YoY to Rs 16.4bn below UBS-e of Rs 17.2bn. EBITDA came in at
Rs 5.5bn which was also below UBS-e of Rs 5.9bn. EBITDA margin came in at
33.5%. EBITDA margin was impacted by higher material cost (+350bps QoQ).
The PAT reported was Rs 5.0bn (UBS-e Rs 5.2bn). PAT was helped by a tax rate
of 2% during the qtr due to tax credits at Taro.
Impact: Revenue momentum seems weak, guidance looks tough to meet
India revenues grew a modest +12%YoY to Rs 6.4bn. International formulation
revenues (ex Taro) grew only 40%qoq despite launch of limited competition,
Docetaxel, in the US. Taro reported revenue of $112mn a growth of 14% YoY.
Per-se it is difficult, in our view, to see how Sun will achieve revenue growth
guidance of 28%-30% given that H2FY12 will have the high base of Taro
consolidation.
Action: Maintain Neutral; await more details on the conf. call:
Q1FY12 conference call at 10:00 A.M. IST on the 29th July (Friday) 2011; Primary
dial in: (+91 22) 6629 0088/ 3065 0088. We will look to revisit our nos. post the
conference call.
Valuation: Maintain Neutral, PT Rs 540
We derive our price target using DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool with a WACC of 11%.
Sun Pharmaceuticals Industries Limited
Sun Pharmaceuticals Industries (Sun Pharma) is the sixth largest pharmaceutical
company in the India. It has a presence in chronic segments such as cardiology,
diabetology, and the central nervous system. In FY10, it derived 46% of sales
from Indian finished dosages, 28% from US finished dosages, 12% from rest of
the world finished dosages and 14% from global API sales. The company
distributes its products in the US through US-listed subsidiary, Caraco
Pharmaceuticals. Sun acquired a majority stake in US-listed Taro Pharma in
September 2010. The founders, the Shanghvi family, own 64% of Sun Pharma.
Statement of Risk
We believe general risks include FDA approval, timing of approvals,
competition from rival drug therapies, litigation (including the appeal process),
accounting/disclosure, and product pricing from generic competition. Pricing
pressure in the US market remains high.
Sun Pharma is increasing its focus on the US business. Risks relating to the
generic pharma sector in US become increasingly applicable now. Continued
rupee appreciation is likely to put further pressure on operating margins going
forward.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Sun Pharma
Q 1FY12: Below UBS-e on revenue miss
Event: Q1FY12 – Sales, EBITDA below UBS-e
Sales grew 20%YoY to Rs 16.4bn below UBS-e of Rs 17.2bn. EBITDA came in at
Rs 5.5bn which was also below UBS-e of Rs 5.9bn. EBITDA margin came in at
33.5%. EBITDA margin was impacted by higher material cost (+350bps QoQ).
The PAT reported was Rs 5.0bn (UBS-e Rs 5.2bn). PAT was helped by a tax rate
of 2% during the qtr due to tax credits at Taro.
Impact: Revenue momentum seems weak, guidance looks tough to meet
India revenues grew a modest +12%YoY to Rs 6.4bn. International formulation
revenues (ex Taro) grew only 40%qoq despite launch of limited competition,
Docetaxel, in the US. Taro reported revenue of $112mn a growth of 14% YoY.
Per-se it is difficult, in our view, to see how Sun will achieve revenue growth
guidance of 28%-30% given that H2FY12 will have the high base of Taro
consolidation.
Action: Maintain Neutral; await more details on the conf. call:
Q1FY12 conference call at 10:00 A.M. IST on the 29th July (Friday) 2011; Primary
dial in: (+91 22) 6629 0088/ 3065 0088. We will look to revisit our nos. post the
conference call.
Valuation: Maintain Neutral, PT Rs 540
We derive our price target using DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool with a WACC of 11%.
Sun Pharmaceuticals Industries Limited
Sun Pharmaceuticals Industries (Sun Pharma) is the sixth largest pharmaceutical
company in the India. It has a presence in chronic segments such as cardiology,
diabetology, and the central nervous system. In FY10, it derived 46% of sales
from Indian finished dosages, 28% from US finished dosages, 12% from rest of
the world finished dosages and 14% from global API sales. The company
distributes its products in the US through US-listed subsidiary, Caraco
Pharmaceuticals. Sun acquired a majority stake in US-listed Taro Pharma in
September 2010. The founders, the Shanghvi family, own 64% of Sun Pharma.
Statement of Risk
We believe general risks include FDA approval, timing of approvals,
competition from rival drug therapies, litigation (including the appeal process),
accounting/disclosure, and product pricing from generic competition. Pricing
pressure in the US market remains high.
Sun Pharma is increasing its focus on the US business. Risks relating to the
generic pharma sector in US become increasingly applicable now. Continued
rupee appreciation is likely to put further pressure on operating margins going
forward.
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