Sun Phar­ma­ceu­ti­cal In­dus­tries Ltd: Niche drug!

Money Times - - Stock Buzz - By Subra­ma­nian Ma­hade­van

(BSE Code: 524715) (CMP: Rs.483.30) (FV: Re.1)

Es­tab­lished in 1983, Mum­bai-based Sun Phar­ma­ceu­ti­cal In­dus­tries Ltd (Sun Pharma) is an Indian multi­na­tional phar­ma­ceu­ti­cal com­pany with 26+ man­u­fac­tur­ing locations glob­ally, which man­u­fac­tures and sells phar­ma­ceu­ti­cal for­mu­la­tions and ac­tive phar­ma­ceu­ti­cal in­gre­di­ents (APIs) pri­mar­ily in In­dia and USA. It of­fers for­mu­la­tions in var­i­ous ther­a­peu­tic ar­eas such as car­di­ol­ogy, psy­chi­a­try, neu­rol­ogy, gas­troen­terol­ogy and di­a­betol­ogy. It also pro­vides APIs such as war­farin, car­ba­mazepine, etodolac and clo­razepate as well as an­ti­cancers, steroids, pep­tides, sex hor­mones and con­trolled sub­stances.

Sun Pharma hit the cap­i­tal mar­ket in 1994 and its IPO was over­sub­scribed 55 times. The ac­qui­si­tion of Ran­baxy in 2014 has made Sun Pharma the largest pharma com­pany in In­dia, the largest Indian pharma com­pany in USA and the 5th largest speciality generic com­pany glob­ally. Dur­ing Q1FY18, it posted a loss of Rs.425 crore due to a one-time hit (~Rs.950 crore) re­lated to anti-trust lit­i­ga­tion set­tle­ment of generic drug Modafinil. Sun Pharma’s Halol man­u­fac­tur­ing plant in Gu­jarat on which the USFDA had slapped ob­ser­va­tions post in­spec­tion and banned ex­ports since De­cem­ber 2015 is set to re­vive. The costly re­me­dial mea­sures are now over and re-in­spec­tion is ex­pected by the USFDA reg­u­la­tor soon. The dark clouds over the com­pany will start re­ced­ing slowly as the phar­ma­ceu­ti­cal sec­tor in gen­eral and Sun Pharma in par­tic­u­lar post ro­bust sales and prof­its be­gin­ning FY19 given the heavy in­vest­ments in speciality busi­ness and its pipe­line of com­plex generic prod­uct launches in USA and other reg­u­lated mar­kets slated for FY19.

The US generic busi­ness, from which most Indian pharma com­pa­nies like Dr. Reddy’s, Glen­mark, Ci­pla and Aurobindo Pharma de­rive most of their rev­enues, will con­tinue to wit­ness in­tense com­pe­ti­tion and healthy price ero­sion. Although Sun Pharma has lit­er­ally eroded Rs.125000 crore of mar­ket cap and in­vestors’ wealth over the last two years, we strongly believe that at the CMP, the stock is re­ally at­trac­tive as it trades at 16x FY19E and 24x FY18E earn­ings. Brace for tough quar­ters in the rest of FY18 to reap good-to-bet­ter re­turns from Sun Pharma in FY19. In­vestors can con­sider buy­ing this stock at the cur­rent level for over 50% re­turns within two years, with very limited down­side.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.