A 33% growth in turnover in a year when the overall industry grew by 9.8%, a 20% pretax margin and a return on networth of 24% is a stupendous performance by any standard. That’s what Sun Pharma has achieved in 1999–2000.
The company has achieved this, by a focus on prescription based drugs focused on cardiology, neurology, pychiatry, gastroentology etc. Last year the group decided to make Sun Pharmaceutical Exports into a 100% subsidiary, which further helped boost export growth to 27% last year. (Bulk drugs comprise almost 80% of the company’s exports.)
% of turnover
While this topline growth is expected to be maintained this year, what is important that the company is now venturing increasingly into anti–infectives a segment where competition is from the bigger boys viz. Ranbaxy, Cipla etc. However, the fact remains that anti–infectives comprise almost 70% of the formulations sold in the country. And if a company wants to grow in size, in the domestic market, it cannot avoid entry into anti–infectives.
For the export market, the company is planning to cater to the generic market via its US affiliate Caraco in the future. If one were to assume that the company’s topline would grow by another 30% in the current year and the company is able to maintain its pre–tax margin, the stock at the current level of Rs 607 quotes at a multiple of 25 times FY2001 earnings.
Sun Pharma has changed gears alright. What remains to be seen is whether the company is able to sustain its profitability.
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