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S u n s u r p r i s e s a g a i n …
Sun Pharmaceutical’s Q2FY12 results were above our expectation on the
back of the robust performance from Taro Pharmaceuticals. The results
were not comparable YoY due to the consolidation of Taro
Pharmaceuticals and higher one-time residual sales from exclusive
product Eloxatin in Q2FY11. Sales grew 42.3% YoY to | 1894.6 crore
slightly above our expectation of | 1821 crore. EBITDA margins increased
630 bps to 41.4% despite a higher base on the back of robust margins
clocked by Taro and higher value of closing stock. Despite robust sales
growth and healthy expansion in margins, the net profit increased by only
18.7% to | 597.7 crore on the back of higher tax provision and minority
interest. We maintain our HOLD rating on the stock.
ƒ Taro boosts overall sales & profitability
Taro Pharmaceuticals registered sales of US$138 million, an
increase of 34% YoY, which was higher than our estimates of
US$118 million. Taro’s management indicated that strong growth
was on account of capitalising on market opportunities, which may
not be sustainable in the upcoming quarters. EBITDA margins stood
at 44.8% as against 24% YoY on the back of higher realisation and
lower R&D expenditure. Due to forex gains of US$16 million, the net
went up to US$58.9 million (our expectation: US$30 million) as
against US$18.5 million. During the quarter, Sun offered to buy the
remaining shares of Taro (~34%) at $24.50 per share.
V a l u a t i o n
Resolution of USFDA issues at its New Jersey facility is certainly a shot in
the arms for the company along with improving Taro financials (albeit
with certain one-offs). Full integration of Taro and early resolution of
Caraco facility are events to watch for. With its debt-free status, strong
presence in the US and established domestic franchise with more chronic
focus, Sun will continue to command a hefty premium vis-à-vis larger
peers. Currently, the stock is trading at ~26x FY12E EPS of | 19.8 and
~21x FY13E EPS of | 23.2. Overall, we expect Sun Pharma’s sales,
EBITDA and net profit to grow at a CAGR of 21%, 18% and 15%,
respectively. We have arrived at a target price of | 510 i.e. 22x FY13E EPS
of | 23.2. We maintain our HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S u n s u r p r i s e s a g a i n …
Sun Pharmaceutical’s Q2FY12 results were above our expectation on the
back of the robust performance from Taro Pharmaceuticals. The results
were not comparable YoY due to the consolidation of Taro
Pharmaceuticals and higher one-time residual sales from exclusive
product Eloxatin in Q2FY11. Sales grew 42.3% YoY to | 1894.6 crore
slightly above our expectation of | 1821 crore. EBITDA margins increased
630 bps to 41.4% despite a higher base on the back of robust margins
clocked by Taro and higher value of closing stock. Despite robust sales
growth and healthy expansion in margins, the net profit increased by only
18.7% to | 597.7 crore on the back of higher tax provision and minority
interest. We maintain our HOLD rating on the stock.
ƒ Taro boosts overall sales & profitability
Taro Pharmaceuticals registered sales of US$138 million, an
increase of 34% YoY, which was higher than our estimates of
US$118 million. Taro’s management indicated that strong growth
was on account of capitalising on market opportunities, which may
not be sustainable in the upcoming quarters. EBITDA margins stood
at 44.8% as against 24% YoY on the back of higher realisation and
lower R&D expenditure. Due to forex gains of US$16 million, the net
went up to US$58.9 million (our expectation: US$30 million) as
against US$18.5 million. During the quarter, Sun offered to buy the
remaining shares of Taro (~34%) at $24.50 per share.
V a l u a t i o n
Resolution of USFDA issues at its New Jersey facility is certainly a shot in
the arms for the company along with improving Taro financials (albeit
with certain one-offs). Full integration of Taro and early resolution of
Caraco facility are events to watch for. With its debt-free status, strong
presence in the US and established domestic franchise with more chronic
focus, Sun will continue to command a hefty premium vis-à-vis larger
peers. Currently, the stock is trading at ~26x FY12E EPS of | 19.8 and
~21x FY13E EPS of | 23.2. Overall, we expect Sun Pharma’s sales,
EBITDA and net profit to grow at a CAGR of 21%, 18% and 15%,
respectively. We have arrived at a target price of | 510 i.e. 22x FY13E EPS
of | 23.2. We maintain our HOLD rating on the stock.
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