Technology

For 2QFY2016, Sun Pharmaceuticals Industries (Sun Pharma) posted results
marginally lower than our expectations. Sales for the quarter, at Rs6,803cr (V/s
Rs6,600cr estimated) dipped 15% yoy. On the operating front, the company
posted an OPM of 27.9% V/s 38.0% in 2QFY2015 and V/s our expectation of
25.4%. The company had benefitted significantly in 2QFY2015 from the 180-
day exclusivity on Valsartan tablets in the US, which resulted in a higher base for
the quarter under review. Thus, the net profit came in at Rs1,107cr V/s Rs1,145cr
expected and V/s Rs2,051cr in 2QFY2015, a yoy dip of 46.0%. Other income
during the quarter came in at Rs225.6cr V/s Rs29.1cr in 2QFY2015. However, we
are currently maintaining our target price of Rs950.
Results better than expected on the OPM front: For 2QFY2016, Sun Pharma
posted results marginally lower than our expectations. Sales for the quarter, at
Rs6,803cr (V/s Rs6,600cr estimated) dipped 15% yoy. Sun posted results
marginally lower than expected. For 2QFY2016, the company posted sales of
Rs6,803cr (V/s Rs6,600cr estimated), a dip of 15% yoy. Amongst the key markets-
India (Rs1,819cr) posted a growth of only 1%, US (US$510mn) posted a degrowth
of 28% yoy, Emerging markets (US$140mn) were down by 16% yoy and
ROW(US$76mn) was down 30% yoy. On the operating front, the company
posted an OPM of 27.9% V/s 38.0% in 2QFY2015. This was against our
expectations of 25.4%. The company had benefitted significantly in 2QFY2015
from the 180-day exclusivity on Valsartan tablets in the US resulting in a higher
base. Thus, the net profit came in at Rs1,107cr V/s Rs1,145cr expected and V/s
Rs2,051cr in 2QFY2015, a yoy dip of 46.0%. Other income during the quarter
came in at Rs225.6cr V/s Rs29.1cr in 2QFY2015.
Outlook and valuation: Sun Pharma is one of the largest and fastest growing
Indian pharmaceutical companies. We expect its net sales to post a 9.3% CAGR
(including Ranbaxy Laboratories) to Rs32,610cr and EPS to post an 8.4% CAGR to
Rs26.9 over FY2015–17E. We recommend a Buy on the stock.

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