Sun Pharma (Re­duce)

The Hindu Business Line - - MARKET RADAR -

CMP: ₹411.3

Tar­get: ₹479

Sun Phar­ma­ceu­ti­cal In­dus­tries is a phar­ma­ceu­ti­cals com­pany. The com­pany’s busi­ness seg­ments in­clude US busi­ness, In­dian branded gener­ics busi­ness, emerg­ing mar­kets, global con­sumer health­care busi­ness and ac­tive phar­ma­ceu­ti­cal in­gre­di­ents (API). Its rest of the world seg­ment in­cludes West­ern Europe, Canada, Aus­tralia, New Zealand and other mar­kets.

In a con­fer­ence call to­day, Sun Phar­ma­ceu­ti­cal In­dus­tries’ MD, Dilip Sanghvi, tried to as­suage in­vestor con­cerns re­lat­ing to al­le­ga­tions of in­sider trad­ing and the com­pany’s busi­ness struc­ture. Most of the dis­cus­sion (Link) fo­cussed on re­lated party trans­ac­tions (Aditya Medisales), in­sider-trad­ing al­le­ga­tions, low tax rates and a sharp spike in un­se­cured loans ($300 mil­lion+) dur­ing FY18. While man­age­ment high­lighted some al­le­ga­tions as fac­tu­ally in­cor­rect and some as ret­ro­spec­tive in na­ture (dat­ing 10-15 years ago), there is still lim­ited clar­ity on un­se­cured loans as well as the pend­ing over­hang of the al­leged 150-page whis­tle-blower let­ter to SEBI; this may (or may not) raise fur­ther ques­tions and also de­cide the medium-term course of the stock. Pend­ing clar­ity, we cut our tar­get mul­ti­ple from 25x to 22x, and re­tain ‘re­duce’ on the stock with a re­vised tar­get price of ₹479.

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