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Sun Pharmaceuticals (SUNP)
Pharmaceuticals
Results meet our expectations, remains our top pick. Revenues excluding exclusivity
sales of last year and Taro were up 28% yoy, in line with our estimate. However,
EBITDA margin at 41% surprised due to outperformance at Taro and forex impact.
While we expect sales growth to pick up in 2HFY12E, in line with management
guidance, we do not think current margin is sustainable; hence factor in lower margin
in 2HFY12E. We increase FY2012-13E EPS by 2-9% due to higher sales and higher
Rupee assumption. Maintain ADD, PT at Rs590 (was Rs560)—24X core EPS of Rs22 and
Rs60/share of cash. Successful site switch of Caraco filings, resumption of Caraco plant
and continuation of Taro opportunistic sales will result in material upsides to our
FY2013E EPS
2QFY12 sales at Rs19 bn, 3% higher than our estimate, up 28% yoy ex exclusivity/Taro
Sales were up 42% yoy on reported basis, 3% higher than our estimate and excluding Taro and
exclusivity sales of last year were up 28% yoy in 2QFY12, driven by (1) Taro was the main reason
for outperformance, up 34% yoy versus our estimate of 15%, (2) India grew 15% on reported
basis, however, 18% excluding discontinued business, in line with estimate, (3) ROW sales were
up 85% yoy, 7% lower than our estimate, (4) US sales excluding Taro/exclusivity sales grew to
US$66 mn, in line with our estimates, up US$14 mn qoq driven by 12 launches in 1HFY12 (see
Exhibit 5).
PAT ex forex at Rs5.35 bn, in line with our estimate
While sales was largely in line, EBITDA margin at 41% surprised, however, the beat at EBITDA level
was negated by higher tax rate at 15% and higher minority interest due to outperformance of
Taro this quarter. Excluding Taro, EBITDA margin on the base business was at 38%, up from 33%
in 1QFY12, significantly higher than our estimate of 34%. This was largely due to gross margin
expanding to 81% in 2QFY12 from 75% in 1QFY12 on account of inventory closing stock
valuation at higher closing Rupee rate as of end-September 2011. We factor in EBITDA margin of
34.4% on SUN’s base business in 2HFY12E as, though we expect sales to benefit positively from
Rupee deprecation, we do not expect the 2QFY12 gross margin levels to recur in 2HFY12E. PAT
excluding forex gain of Rs735 mn or US$16 mn reported by Taro was at Rs5.35 bn, in line with
our estimate. Tax rate was at 15%, up from 3% in 1QFY12 due to higher tax rate at Taro with
SUN tax rate (excluding Taro) at 9%.
We increase our FY2012-13E estimates by 2-9%, estimate FY2012E sales growth at 30%
Sales growth excluding exclusivity sales and Taro was at 27% in 1HFY12. We expect corresponding
sales growth to pick up to 30% in 2HFY12E and expect reported sales growth at 30% in FY2012E,
higher end of management guidance. We estimate base business EBITDA margin at 34.4% in
2HFY12E (38% in 2QFY12), increasing to 34.7% in FY2013E
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sun Pharmaceuticals (SUNP)
Pharmaceuticals
Results meet our expectations, remains our top pick. Revenues excluding exclusivity
sales of last year and Taro were up 28% yoy, in line with our estimate. However,
EBITDA margin at 41% surprised due to outperformance at Taro and forex impact.
While we expect sales growth to pick up in 2HFY12E, in line with management
guidance, we do not think current margin is sustainable; hence factor in lower margin
in 2HFY12E. We increase FY2012-13E EPS by 2-9% due to higher sales and higher
Rupee assumption. Maintain ADD, PT at Rs590 (was Rs560)—24X core EPS of Rs22 and
Rs60/share of cash. Successful site switch of Caraco filings, resumption of Caraco plant
and continuation of Taro opportunistic sales will result in material upsides to our
FY2013E EPS
2QFY12 sales at Rs19 bn, 3% higher than our estimate, up 28% yoy ex exclusivity/Taro
Sales were up 42% yoy on reported basis, 3% higher than our estimate and excluding Taro and
exclusivity sales of last year were up 28% yoy in 2QFY12, driven by (1) Taro was the main reason
for outperformance, up 34% yoy versus our estimate of 15%, (2) India grew 15% on reported
basis, however, 18% excluding discontinued business, in line with estimate, (3) ROW sales were
up 85% yoy, 7% lower than our estimate, (4) US sales excluding Taro/exclusivity sales grew to
US$66 mn, in line with our estimates, up US$14 mn qoq driven by 12 launches in 1HFY12 (see
Exhibit 5).
PAT ex forex at Rs5.35 bn, in line with our estimate
While sales was largely in line, EBITDA margin at 41% surprised, however, the beat at EBITDA level
was negated by higher tax rate at 15% and higher minority interest due to outperformance of
Taro this quarter. Excluding Taro, EBITDA margin on the base business was at 38%, up from 33%
in 1QFY12, significantly higher than our estimate of 34%. This was largely due to gross margin
expanding to 81% in 2QFY12 from 75% in 1QFY12 on account of inventory closing stock
valuation at higher closing Rupee rate as of end-September 2011. We factor in EBITDA margin of
34.4% on SUN’s base business in 2HFY12E as, though we expect sales to benefit positively from
Rupee deprecation, we do not expect the 2QFY12 gross margin levels to recur in 2HFY12E. PAT
excluding forex gain of Rs735 mn or US$16 mn reported by Taro was at Rs5.35 bn, in line with
our estimate. Tax rate was at 15%, up from 3% in 1QFY12 due to higher tax rate at Taro with
SUN tax rate (excluding Taro) at 9%.
We increase our FY2012-13E estimates by 2-9%, estimate FY2012E sales growth at 30%
Sales growth excluding exclusivity sales and Taro was at 27% in 1HFY12. We expect corresponding
sales growth to pick up to 30% in 2HFY12E and expect reported sales growth at 30% in FY2012E,
higher end of management guidance. We estimate base business EBITDA margin at 34.4% in
2HFY12E (38% in 2QFY12), increasing to 34.7% in FY2013E
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