Technology

For 4QFY2016, Sun Pharmaceuticals Industries (Sun Pharma) posted results
marginally lower than our expectations. Sales for the quarter, at Rs7,414cr (V/s
Rs7,700cr estimated) grew 20.7% yoy. On the operating front, the company
posted an OPM of 31.0% V/s 14.3% in 4QFY2015 and V/s our expectation of
34.9%. Thus, the net profit came in at Rs1,714cr V/s Rs1,653cr expected and V/s
Rs889cr in 4QFY2015, a yoy growth of 92.7%. For FY2017, the company has guided
for 8-10% yoy growth, while R&D expenses are expected to be 9% of sales in
FY2017. However, we are currently maintaining our buy with target price of Rs944.
Results mostly in line with expectations: For 4QFY2016, Sun Pharma posted
results marginally lower than our expectations. Sales for the quarter, at Rs7,414cr
(V/s Rs7,700cr estimated) grew 20.7% yoy. The Indian formulations market
posted a growth of 17% yoy to Rs1807cr. US finished dosage sales at US$580mn
were up by 19% yoy. US sales include the benefit of the 180-day exclusivity for
Imatinib which commenced from Feb 2016. Emerging Markets sales stood at
US$124mn, while Rest of World (RoW) sales came in at US$79mn.On the
operating front, the company posted an OPM of 31.0% V/s 14.3% in 4QFY2015
and V/s our expectation of 34.9%. R&D expenditure during the quarter was 9.6%
of sales. Thus, the net profit came in at Rs1,714cr V/s Rs1,653cr expected and V/s
Rs889cr in 4QFY2015, a yoy growth of 92.7%. Other income during the quarter
came in at Rs185cr V/s Rs396cr in 4QFY2015.
Outlook and valuation: Sun Pharma is one of the largest and fastest growing
Indian pharmaceutical companies. We expect its net sales to post a 12.7% CAGR
(including Ranbaxy Laboratories) to Rs35,258cr and EPS to post a 22.0% CAGR to
Rs32.8 over FY2016–18E. We recommend a Buy on the stock.

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