Technology

The company’s sales for 1QFY2017 came in higher than expected at
Rs8,007cr V/s Rs7,414cr expected and V/s Rs6,526cr in 1QFY2016, a yoy
growth of 22.7%, mainly driven by exports. On the operating front, the
EBITDA margin came in at 33.5% V/s 29.5% expected and V/s 23.5% in
1QFY2016, mainly driven by gross margin expansion (76.9% in 1QFY2017
V/s 74.1% in 1QFY2016). Thus, the Adj. net profit came in at Rs2,034cr V/s
Rs1,602cr expected and V/s Rs1,070cr in 1QFY2016. We maintain our Buy
rating.
Results outperform: Company’s sales for 1QFY2017 came in higher than
expected at Rs8,007cr V/s Rs7,414cr expected and V/s Rs6,526cr in 1QFY2016, a
yoy growth of 22.7%, mainly driven by exports. Export formulations (Rs5,664cr)
grew 25.6% yoy, while Indian formulations (Rs1,854cr) grew 7.6% yoy. API sales
(Rs470cr) grew 73.1% yoy. On the operating front, the EBITDA margin came in at
33.5% V/s 29.5% expected and V/s 23.5% in 1QFY2016, mainly driven by gross
margin expansion (76.9% in 1QFY2017 V/s 74.1% in 1QFY2016). R&D
expenditure during the quarter was 9.1% of sales V/s 5.5% of sales in
1QFY2016. Thus, the Adj. net profit came in at Rs2,034cr V/s Rs1,602cr expected
and V/s Rs1,070cr in 1QFY2016.
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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