December 14, 2016 / 16:10 IST
We assessed the USFDA’s 483 letter for SUNP’s Halol plant. Our reading suggests: (a) none of the observations are a repeat of the warning letter and (b) the observations largely relate to SOPs (standard operating procedures) and not to any data integrity issues. Quite a few observations refer to issues with Bupropion HCL ER tablets; note that SUNP has recalled this product twice in the last 15 months (Sep’15 and Oct’16).
Outlook
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We recently upgraded SUNP to BUY given a favourable risk-reward profile (stock trading at 19x FY18E EPS – the lower end of historical valuations), potential triggers from Halol and Mohali plant resolution and the culmination of Ranbaxy synergies (already visible in Q2FY17). We maintain our positive view and retain our Sep’17 TP of Rs 875 for 25% upside.
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