ICICIDirect has recommended hold rating on Sun Pharma with a target price of Rs 845 in its research report dated February 15, 2016.
ICICIDirect's research report on Sun Pharma
Revenues grew 2.2 YoY to | 7082.1 crore (I-direct estimate: | 6734.5) on account of 8.3% growth in domestic sales to | 1890.3 crore and 69.7% growth in API sales to | 441 crore led by consolidation of opiates business in Australia. US formulations, on the other hand, continued to languish and declined ~6% to | 3200.3 crore Sequentially, EBITDA margins increased 235 bps to 30.6% (I-direct estimate: 28.5%) due to strong margins at Taro. Taro’s EBITDA margins increased 756 bps QoQ to 68.8%. EBITDA grew 12.2% QoQ to | 2169 crore (I-direct estimate: | 1919.3 crore) Net profit grew 258.3% YoY | 1416.6 crore (I-direct estimate: | 1107.1 crore) mainly due to higher other income led by proceeds received on brand divestments and lower taxation
Adjusting for consolidation and one-offs, the ex-taro Q3 numbers were more or less in line with our expectations. We believe most of the negatives pertaining to the Halol plant have been factored in. However, until the Halol resolution, US sales are likely to remain under pressure even though the company has sufficient bandwidth to make alternate arrangements. Other developments in the field of biosimilars and acquisitions are likely to be overshadowed by this glaring issue. The progress on Halol may have prompted the management to approach the USFDA in Q1FY17 for re-inspection. We have ascribed a target price of | 845 based on 24x FY18E EPS of | 35.2. We maintain our HOLD rating until any positive development takes place regarding Halol.
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