3 September 2014
Update | Sector: Healthcare
Annual Report 2014 Analysis
Well charted strategy offers growth visibility
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
SUNP’s FY14 annual report provides good visibility on the key pillars of growth
which include enhancing its pipeline of complex/specialty products for the US and
successfully turning around Ranbaxy’s operations.
Future focus will be on building a differentiated product basket, foraying into
products that yield stable and consistent cash flows.
At the same time, the company continues to be on the lookout for value
enhancing inorganic opportunities in the US.
Financial Snapshot (INR b)
2015E 2016E 2017E
175.8 204.6 230.7
EPS Gr. (%)
Core EPS (INR) 26.2
Shareholding Pattern (%)
Jun-14 Mar-14 Jun-13
The India subsidiary created last year (Sun Pharma Global) has shown a PBT
of INR3.4b versus a negative PBT of INR1.3b in FY13.
URL Pharma did sales of INR 17.6b with PAT of INR 6b (margins of ~30). A
significant part of URL Pharma performance in FY14 was driven by
favourable pricing for key products and re-launch of some of the
discontinued products from URL’s portfolio. Recently, prices of some of
these products have normalised significantly and hence a part of URL
Pharma’s performance may not be sustainable in our view.
Dusa Pharma reported sales of INR 4.3b versus INR975m in FY13
(consolidated for three months) while it turned profitable in FY14 (INR237m
vs loss of INR47m in FY13). This was driven by greater penetration with
dermatologists and gradual price increases.
SUNP is carrying hedges of USD240m with MTM loss of INR2b classified as
long-term provision. This implies hedges are for a period of over one year,
largely hedged in the range of 50-52.
Contingent liabilities related to income tax on account of disallowance/
addition has increased from INR7.6b in FY13 to INR12.1b in FY14.
Valuation and view
FII incl. depository receipts
Stock Performance (1-year)
We remain confident of SUNP’s business mix and execution skills in its key
We however see a slow FY15 for SUNP’s base business which we believe is
expected to bounce back to mid teens growth in FY16. But, prospects of
consolidating Ranbaxy’s business and potential turn-around continue to
with a revised target SoTP price target of INR980 which
includes upsides from Ranbaxy’s business.
However, stock may trade in a narrow range till the RBXY deal concludes
and any decline presents a buying opportunity.
(Alok.Dalal@MotilalOswal.com); +91 22 3982 5584
(Hardick.Bora@MotilalOswal.com); +91 22 3982 5423
Investors are advised to refer through disclosures made at the end of the Research Report.