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Rich valuations to continue, but further rerating unlikely: initiate with Neutral.
Our Mar-12 PT of Rs510 values the base business at Rs494/share on 22xFY13E
P/E and para IV opportunities at Rs16/share. Leadership in fast-growing chronic
therapies in India, acquisition and para IV-led growth for US generics, expansion
in emerging markets and USD1B cash make for a strong investment case.
However, it is at a 20% premium to peers on FY12E P/E, and while rich
valuations may continue, we think further multiple expansion is unlikely given
slowing domestic market growth, low visibility of para IV opportunities beyond
FY14E and potential risk from Protonix litigation. We would look to buy the stock
closer to Rs420-Rs430 levels, at-least 15%-20% below our price target
Domestic leadership in fast-growing chronic segments. Early entry in
emerging chronic segments, sales organization focused on specialist doctors and
steady product basket expansion have driven above market growth, which we
expect to continue. However, domestic market growth is slowing and SUNP is
not immune, we estimate 15% revenue CAGR over next 3 years, slowing form
20% CAGR delivered over FY06-FY11.
Strong acquisition-led growth in the US. We estimate Taro and para IV
opportunities will drive 31% revenue CAGR in the US over FY11-FY14E,
though we see para IV opportunities tapering off beyond FY14. Resolution of
regulatory issues with Caraco could drive upside; adverse ruling on Protonix
could dent earnings materially.
Seeking growth in new markets. SUNP’s presence in emerging markets has
been enhanced by Taro acquisition and recent distribution JV with Merck, while
it has recently started selling in the EU. We estimate RoW revenues to grow at
26.4% CAGR over FY11-FY14E.
Base earnings CAGR of 14% over FY11-FY14E, scouting for acquisitions.
SUNP has USD1B cash on its books, and we estimate it will generate USD1.4B
over FY12-FY14E. It is seeking inorganic opportunities; we believe emerging
markets acquisition is high on the agenda. Upside risks include big-ticket
approvals in the US, pick-up in domestic growth and Caraco resolution.
Downside risks include delays in US product launches, protracted slowdown in
India and adverse ruling on Protonix.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Rich valuations to continue, but further rerating unlikely: initiate with Neutral.
Our Mar-12 PT of Rs510 values the base business at Rs494/share on 22xFY13E
P/E and para IV opportunities at Rs16/share. Leadership in fast-growing chronic
therapies in India, acquisition and para IV-led growth for US generics, expansion
in emerging markets and USD1B cash make for a strong investment case.
However, it is at a 20% premium to peers on FY12E P/E, and while rich
valuations may continue, we think further multiple expansion is unlikely given
slowing domestic market growth, low visibility of para IV opportunities beyond
FY14E and potential risk from Protonix litigation. We would look to buy the stock
closer to Rs420-Rs430 levels, at-least 15%-20% below our price target
Domestic leadership in fast-growing chronic segments. Early entry in
emerging chronic segments, sales organization focused on specialist doctors and
steady product basket expansion have driven above market growth, which we
expect to continue. However, domestic market growth is slowing and SUNP is
not immune, we estimate 15% revenue CAGR over next 3 years, slowing form
20% CAGR delivered over FY06-FY11.
Strong acquisition-led growth in the US. We estimate Taro and para IV
opportunities will drive 31% revenue CAGR in the US over FY11-FY14E,
though we see para IV opportunities tapering off beyond FY14. Resolution of
regulatory issues with Caraco could drive upside; adverse ruling on Protonix
could dent earnings materially.
Seeking growth in new markets. SUNP’s presence in emerging markets has
been enhanced by Taro acquisition and recent distribution JV with Merck, while
it has recently started selling in the EU. We estimate RoW revenues to grow at
26.4% CAGR over FY11-FY14E.
Base earnings CAGR of 14% over FY11-FY14E, scouting for acquisitions.
SUNP has USD1B cash on its books, and we estimate it will generate USD1.4B
over FY12-FY14E. It is seeking inorganic opportunities; we believe emerging
markets acquisition is high on the agenda. Upside risks include big-ticket
approvals in the US, pick-up in domestic growth and Caraco resolution.
Downside risks include delays in US product launches, protracted slowdown in
India and adverse ruling on Protonix.
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