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Sun Pharma In The News

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Sun Pharmas Bigger than Three Rivals Put Together

Stock touches record high, taking its m-cap above combined m-cap of DRL, Lupin & Cipla

 The stock of Sun Pharmaceuticals hit a record high on Tuesday, catapulting its market capitalisation above that of Dr Reddy’s Laboratories, Cipla and Lupin put together. An impressive revenue and profit growth, benefits from overseas acquisitions, currency depreciation and healthy sales of its cancer drug Lipodox took the stock to a record high of . 997.85, up by almost a percent on Tuesday.
About 30 of 50 analysts have a buy recommendation on the stock, which is currently trading above all analyst targets. The company trades at a price-toearning multiple of 36 times its trailing 12 months profits compared to Dr Reddy’s 23.36 times, Cipla’s 21.40 times and Lupin’s 30 times. Given its steep climb, some analysts expect a correction in the stock, which, if it happens, is viewed as a good “buying” opportunity. “Sun has run up a lot over the last few weeks. The stock could correct 5-10%, which we would view as a good opportunity to add to positions in India’s best generic company (world’s second-largest by market cap after Teva),” said Morgan Stanley in a report on Monday. “Sun Pharma always commanded premium valuation compared to other peers,” said Sonam Udasi, head of research at IDBI Capital. “Given the robust outlook on all business segments and also considering the fact that the domestic pharma business is growing at a rate of 15% annually, the Sun’s premium valuation is justified.” The stock has gained 35% so far this year compared to 8% gain of the BSE Healthcare index. The stock is also trading above all key moving averages. There have been some significant developments related to Sun Pharma in the recent past. The company has received the tentative approval for two significant abbreviated new drug applications (ANDAs)/generics for sale in the US market and its unit, URL Pharma, recently hike the price of one of its products significantly. This, along with its recent acquisitions and strong product pipeline, is likely to help Sun Pharma replicate its overall robust performance in FY13 going forward as well. “The launch of the generic, Doxil, gains from price hikes, and the recent acquisitions of DUSA & URL Pharma will drive strong overall growth in the near-term,” a First Global report said. “The long-term outlook also remains strong due to a robust ANDA pipeline with various niche opportunities...”
The company reported a 33% growth in its consolidated net sales, and its operating profit margin stood at 44% for the quarter ended December 2012. The company’s revenues in the domestic market, now contributing a little over one-fourth of the total revenues, grew by 13%, outperforming the industry growth. According to Antique Stock Broking, the management highlighted that despite Taro’s outperformance by a wide margin for eight consecutive quarters, the current run rate is clearly unsustainable. The price hike in specific products has been a function of capacity glut and the management does not expect the dynamic to sustain. The December quarter EBITDA margins at 56% are unusual for a generic company, although it is not clear for how long the windfall gains will last.