Hold Sun Pharmaceuticals: Ventura
Ventura has recommended hold rating on Sun Pharmaceuticals Industries, in its May 29, 2013 research report. The research firm expects, the company to continue to grow on account of strong foothold in domestic market and robust growth in the international business.
June 08, 2013 / 12:37 IST
Ventura's research report on Sun Pharma
"Sun Pharmaceuticals Industries reported revenues at Rs 3,071 crore, up by 31.5 percent YoY for Q4FY13 and PAT of Rs 1,011 crore, up by 23.3 percent YoY compared to Rs 820 crore in corresponding period last year, on back of higher operational income. For the full year Net sales grew by 40 percent to Rs 11,239 crore and PAT increased by 39 percent to Rs 3,591 crore. Indian formulation business registered growth of 16 percent to Rs 780 crore. The company launched 2 products during the quarter taking the total for the year to 25.US markets grew 63 percent YoY to USUSD 330 million in dollar terms coupled with increase in market size and prices of certain products, depreciating rupee, new product launches. Sales in the U.S. increased both for Sun's product as well as for Taro.Although For Q4FY13, Taro posted a lower than expected profit margin. Sales grew by 13.8 percent YoY to of USUSD 165.1 Mn compared to USUSD 145.1 Mn in corresponding period last year. Profit increased marginally by 4.2 percent to USUSD 49.2 Mn. For full year FY13, net sales increased by 24 percent to USUSD 671 Mn.Formulation sales in the RoW market accounted for USD 73 million in the fourth quarter, registering a growth of 13 percent over the same quarter previous year. For the full year, international formulation sales at USD 281 million were up 21 percent in dollar terms, and excluding Taro, Sun's RoW sales for the year were up by 32 percent in dollar terms. API business has witnessed a growth of 11 percentYoY in Q4FY13.The company’s management has guided 18 percent-20 percent topline growth at constant currency basis for FY14 which is achievable if Sun Pharma & Taro continues to launch niche products. Management has also guided for 25 ANDA filings in FY14.Total capex, for FY14, is expected to be ~ Rs 800 crore. R&D expenditure for fourth quarter was Rs 203 crore at 6.6 percent of the sales, while for the full year it was Rs 676 crore or 6 percent of sales. For next year R&D expenses are expected to be around 6 percent to 8 percent of sales with expected tax rate ~18 percent to 20 percent.We expect Sun Pharmaceuticals to continue to grow on account of strong foothold in domestic market and robust growth in the international business. Company has witnessed a strong US growth, excluding Taro, and increase in price of URL portfolio along with consolidation of DUSA. Management has guided for a growth of 18 percent to 20 percent in FY14 on account of higher base and expects that some of the growth drivers in FY13 are not sustainable. At CMP of Rs 1,066, stock is quoting at 28.86x and 24.93x FY14E and FY15E earnings, we recommend a HOLD on the stock," says Ventura Securities research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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