Buy Sun Pharma; target of Rs 950: Angel Broking

Angel Broking’s research report on Sun PharmaFor 2QFY2016, Sun Pharmaceuticals Industries (Sun Pharma) posted results marginally lower than our expectations. Sales for the quarter, atRs. 6,803cr (V/sRs. 6,600cr estimated) dipped 15% yoy. On the operating front, the company posted an OPM of 27.9% V/s 38.0% in 2QFY2015 and V/s our expectation of 25.4%. The company had benefitted significantly in 2QFY2015 from the 180- day exclusivity on Valsartan tablets in the US, which resulted in a higher base for the quarter under review. Thus, the net profit came in atRs. 1,107cr V/sRs. 1,145cr expected and V/sRs. 2,051cr in 2QFY2015, a yoy dip of 46.0%. Other income during the quarter came in atRs. 225.6cr V/sRs. 29.1cr in 2QFY2015. However, we are currently maintaining our target price ofRs. 950. Results better than expected on the OPM front:  For 2QFY2016, Sun Pharma posted results marginally lower than our expectations. Sales for the quarter, atRs. 6,803cr (V/sRs. 6,600cr estimated) dipped 15% yoy. Sun posted results marginally lower than expected. For 2QFY2016, the company posted sales ofRs. 6,803cr (V/sRs. 6,600cr estimated), a dip of 15% yoy. Amongst the key markets- India (`1,819cr) posted a growth of only 1%, US (US$510mn) posted a degrowth of 28% yoy, Emerging markets (US$140mn) were down by 16% yoy and ROW(US$76mn) was down 30% yoy. On the operating front, the company posted an OPM of 27.9% V/s 38.0% in 2QFY2015. This was against our expectations of 25.4%. The company had benefitted significantly in 2QFY2015 from the 180-day exclusivity on Valsartan tablets in the US resulting in a higher base. Thus, the net profit came in at Rs. 1,107cr V/sRs.1,145cr expected and V/s Rs. 2,051cr in 2QFY2015, a yoy dip of 46.0%. Other income during the quarter came in at Rs. 225.6cr V/s Rs. 29.1cr in 2QFY2015.Outlook and ValuationSun Pharma is one of the largest and fastest growing Indian pharmaceutical companies. We expect its net sales to post a 9.3% CAGR (including Ranbaxy Laboratories) to Rs. 32,610cr and EPS to post an 8.4% CAGR to Rs. 26.9 over FY2015–17E. We recommend a Buy on the stock.

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