In: Business and Management

Submitted By vicky7777
Words 11935
Pages 48
July 17, 2009 | Pharmaceuticals

Initiating Coverage

Sun Pharmaceuticals (SUNPHA)
In the pit stop…
Sun Pharma (SPIL) is a leading player in the Indian pharma space. Strong focus on cost control, impressive pipeline for the US, strong foothold in domestic markets and a clean & strong balance sheet are the major investment planks of SPIL. We also like its strategy of buying distressed assets and turning it around via strong management bandwidth. We are initiating coverage on SPIL with a PERFORMER rating.

Current Price Rs 1221 Potential upside 10 %

Target Price Rs 1344 Time Frame 12-15 months

Analysts’ Name Raghvendra Kumar Ashish Thavkar Sales & EPS trend
6000 4000 2000 0 FY10E FY11E FY05 FY06 FY07 FY08 FY09 Sales (Rs cr) EPS (Rs) 120 80 40 0

Selective strategy for regulated markets prevents margin contraction
SPIL’s US strategy places the company among one of the highest margin earners in the industry. We estimate SPIL’s US revenue to degrow ~27% on account of recent seizure of 33 Caraco products. However, speedy approval from its portfolio of 108 ANDAs (mostly differentiated ANDAs) pending approval will likely cushion steeper fall in US revenues (we have not factored such revenue in our estimates). Such approvals will likely help maintain margins and US revenue

Strong foothold in domestic chronic segment earns highest margins
SPIL generates one of the highest EBITDA margins (GC ~70-75%) in the industry. This is on account of its strong foothold in niche therapies such as CNS, CVS, diabetes, etc, which contribute ~75-80% of its domestic formulations revenue

Stock Metrics
Bloomberg Code Face Value (Rs) Promoter holding (%) Market Cap (Rs Cr) 52W - H/L Sensex Average Volume SUNP@IN 5.0 63.7 25,289 1600/953 14253 48,321

Clean & debt-free balance sheet with strong…...

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...Laboratories Ltd PHARMACEUTICALS RANBAXY INE015A01028 Neutral Reliance Communications Ltd TELECOMMUNICATION- SERVICES RCOM INE330H01018 Neutral Reliance Industries Ltd REFINERIES RELIANCE INE002A01018 Neutral Reliance Infrastructure Ltd Infrastructure RELINFRA INE036A01016 Positive Reliance Power Ltd POWER RPOWER INE614G01033 Positive Sesa Goa Ltd MINING SESAGOA INE205A01025 Neutral Siemens Ltd ELECTRICAL EQUIPMENT SIEMENS INE003A01024 Positive State Bank of India BANKS SBIN INE062A01012 Neutral Steel Authority of India Ltd STEEL AND STEEL PRODUCTS SAIL INE114A01011 Positive Sterlite Industries (India) Ltd METALS STER INE268A01049 Neutral Sun Pharmaceutical Industries Ltd PHARMACEUTICALS SUNPHARMA INE044A01036 Neutral Tata Consultancy Services Ltd COMPUTERS - SOFTWARE TCS INE467B01029 Neutral Tata Motors Ltd AUTOMOBILES - 4 WHEELERS TATAMOTORS INE155A01022 Neutral Tata Power Co Ltd POWER TATAPOWER INE245A01021 Positive Tata Steel Ltd STEEL AND STEEL PRODUCTS TATASTEEL INE081A01012 Positive Wipro Ltd COMPUTERS - SOFTWARE WIPRO INE075A01022 Neutral...

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