Buy Sun Pharma, tgt Rs 1450: HEM Securities

HEM Securities has maintained buy rating on Sun Pharma with target price of Rs 1450 in its March 07, 2008 research report. “The company has received final USFDA approval for its Ab-breviated New Drug Application (ANDA) to market its generic version of Hoffman la Roche’s Demadex R, torsemide tablets. Use of torsemide has been found to be effective for the treat-ment of edema associated with chronic renal failure. Torsemide is also indicated for the treatment of hypertension alone or in combination with other anti-hypertensive agents. The tablets that are available in four strengths have annual sales of USD 35 million in the US, creating enough room for the company to increase its operations. The company has also received USFDA approval for its ANDA for generic Depakote, divalproex sodium delayed release tab-lets in various strengths that pertain to a sales figure of around USD 755 million in the US.” 

“ After posting tremendous financial performance in the quarter, the company offers immense potential for the future also. Despite the damage done by the strengthening rupee on the margins, the company has been able to deliver strong operating profitability. The ongoing R&D efforts of the company and the strong pipeline of AN-DAs and APIs awaiting approval from USFDA, further add strength to the stock. The company’s strength lies in its cost competitiveness and has been a major factor behind its strong presence in the global generics market. Pharmaceutical friendly budget announced by the FM is also expected to add value to the stock, as the excise duty cuts and higher weighted deduction for research expenses shall help the company to cut down its cost effectively. At current market price of Rs 1308, the stock is trading at 28.16 times to its earnings of Rs 46.44 and 6.64 times to its book value of Rs 197.01. We, initiate a BUY signal on the stock keeping in mind the immense upside po-tential offered at the current level with a target price of Rs 1450 in medium to long term investment horizon, ex-pecting an appreciation of 11%.” Says HEM Securities research report.

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