Buy Sun Pharma, target Rs 1622: Karvy

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Buy Sun Pharma, target Rs 1622: Karvy

Karvy Stock Broking Ltd has retained its market performer rating on Sun Pharma, with price target of Rs 1622, in its report dated February 4, 2010.

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Karvy Stock Broking Ltd has retained its market performer rating on Sun Pharma , with price target of Rs 1622, in its report dated February 4, 2010.

"Revenues for Q3FY10 increased 11.2% y-o-y to Rs.10208.6 mn broadly in line with our expectation of Rs 10472.2 mn. Revenues were boosted in Q3FY10 owing to strong growth (+23.8% y-o-y) to Rs.5326 mn from the domestic formulations space. OPM was reported at 36.1% in Q3FY10. Net profit for Q3FY10 was reported at Rs 3389.5 mn compared to our expectation of Rs 3,164.2 mn primarily due to higher than anticipated operating performance during Q3FY10.

We upgrade our FY 2010E earnings estimates on inclusion of Caraco one time income of USD 20 mn in our model.We upgrade our FY 2010E EPS by 7.8 % to Rs 60.6. We however downgrade our Caraco revenues and margins in line with the 9M FY 10 nos for FY 2011E. On account of lower gross margins we marginally downgrade our EPS estimates for FY 2011E by 1 % to Rs 69.4. We value our core business at 22x FY 2011E at Rs 1527 while we value the Taro upside at 50 % probability to CY10 EPS. We assign 22x to the Rs 4.3 (50 % Taro EPS upside) and arrive at a price target of Rs 95. We hence arrive at a price target of Rs 1622. We continue to rate the stock as Market Performer." says Karvy Stock Broking Ltd.

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To read the full report click on the attachment