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Last Updated : Nov 06, 2015 04:58 PM IST | Source:

Neutral on Sun Pharmaceuticals : Reliance Securities

Reliance Securities has a neutral view on Sun Pharmaceuticals, in its November 04, 2015. research report.

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Todays L/H
Reliance Securities's report on Sun Pharmaceuticals

Taro’s 2Q results is reflective of 6th successive quarter of declining volumes (adjusted for price benefits in 2QFY15) led by customer consolidation, increasing competitive intensity and overall industry consolidation. Taro is a key strategic asset for Sun and contributes significantly to the latter’s margins. Steady build up of cash and ANDA pipeline are medium term positive which allow for strategic flexibility. However, owing to structural headwinds in Sun’s base business, we
maintain NEUTRAL with a Fair Value of Rs 940.

Outlook and Valuation
The continuous decline in performance remains in-line with our expectation despite the price rise taken by the company in wide array of products on the back of shrinking volume growth. While management asserts that price adjustment is now fully reflective in the sales, we remain less optimistic. Assuming best case scenario of 5 launches in FY16E, we expect 50% to be in commoditized oral category making it difficult for Taro to maintain high base growth rate. We forecast Taro to report 7% revenue CAGR over FY15-18E. We maintain NEUTRAL with a Fair Value of Rs 940, says Reliance research report.

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First Published on Nov 6, 2015 04:58 pm
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