Buy Sun Pharma; target of Rs 650: Emkay

Emkay Global Financial Services is bullish on Sun Pharma and has recommended buy rating on the stock with a target of Rs 650 in its May 30, 2012 research report.

“Sun Pharma, EBITDA margins increased by 1000 bps YoY and decline 370 bps QoQ to 41.2%, due to higher selling prices of select products in Taro, strong growth in domestic and INR depreciation. These all are not sustainable. Staff costs increased during the quarter, as company has taken cumulative impact of last 9 months for rupee depreciation resulting to higher outgo. Other Income includes the interest income and forex gains. Going forward in FY13E, there will be volume led growth in US market driven by Para-IV launch of Lexapro and Eloxatin where the company has already settled with innovator. Domestic formulation is expected to grow at 18% on back of ~30 product launches in FY13 and traction in Merck JV. Sun has already launched 22 new products till date in the domestic market.”

“We expect Sun Pharma to report 18% growth in revenues in FY13E and 15% growth in FY14E. EBIDTA margins are expected to move from 41% in FY12 to 37% in FY13/ 14E. Earnings will grow by 10% in FY13E and 16% in FY14E. We revise our target price to Rs650 and upgrade to buy rating. At CMP, the stock trades at 21x FY13E and 18x FY14E EPS,” says Emkay Global Financial Services research report.

FIIs holding more than 30% in Indian cos

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