SUN PHARMA - Strong Base Business; Protonix Liability Not A Major Concern
We reiterate Sun Pharma as our Top Pick in the Indian pharma space after it’s higher than expected Q3 FY12 result with sales and net profit growing by 45% and 91% respectively. This was largely aided by robust increase in Taro’s sales and profitability and partly due to the ramp up of low competition launches like generic Imitrex autoinjector and Cardizem CD. Apparently, the company did not benefit much from a favorable forex at the net earnings level. It is important to note that FY12 performance represents purely the base business with no one off upsides.
Future growth will be driven by (1) resolution of USFDA warning letter on Caraco (2) launch of Para IVs like Prandin, Comtan and Stalevo under 180-day exclusivity in FY12 and (3) a full impact of Taro profitability after acquisition of 100% stake.
We increase our FY12 earnings by 13% and FY13 by 20%. We derive our new target price by applying a PE of 20x on FY13 base business earnings, valuing upcoming Para IVs at Rs. 25 per share, cash at Rs. 43 per share and adjusting for the Protonix liability by Rs. 15 per share. We reiterate our Outperform rating with new target price of `641 per share.
Future growth will be driven by (1) resolution of USFDA warning letter on Caraco (2) launch of Para IVs like Prandin, Comtan and Stalevo under 180-day exclusivity in FY12 and (3) a full impact of Taro profitability after acquisition of 100% stake.
We increase our FY12 earnings by 13% and FY13 by 20%. We derive our new target price by applying a PE of 20x on FY13 base business earnings, valuing upcoming Para IVs at Rs. 25 per share, cash at Rs. 43 per share and adjusting for the Protonix liability by Rs. 15 per share. We reiterate our Outperform rating with new target price of `641 per share.
COMPANIES MENTIONED
SUN PHARMA
SUN PHARMA
