Sun Pharma reported higher-than-expected 2QFY2012 performance. Net sales reported 38.3% yoy growth. Net profit grew by 18.7% yoy, driven by higherthan- expected improvement in OPM. We recommend a Buy rating on the stock.
Better-than-expected results: For 2QFY2012, Sun Pharma reported net sales of Rs.1,895cr, up 38.3% yoy, mainly driven by the inclusion of Taro’s financials as well as strong growth in overall exports. The company’s OPM expanded to 41.4% in 2QFY2012 from 34.1% in 2QFY2011. Gross margin increased to 80.8% in 2QFY2012 from 75.4% in 2QFY2011. The improvement in OPM was higher than gross margin improvement because of lower other expenses during the quarter. Net profit during the quarter reported 18.7% yoy growth to Rs.598cr.
Outlook and valuation: Sun Pharma is one of the largest and fastest growing Indian pharmaceutical companies. Management has guided for 28–30% top-line growth for FY2012. Growth reported during the year can also be attributed to the consolidation of Taro’s financials. Management’s guidance for FY2012E includes all growth aspects from Taro as well. We expect Sun Pharma’s net sales to post a 27.3% CAGR to Rs.9,272cr and EPS to register a 21.4% CAGR to Rs.25.9 over FY2011–13E. We recommend a Buy rating on the stock with a target price of Rs.569.
Della
December 16, 2011 at 00:57
Hey, that\’s a clever way of thiknnig about it.