X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Caraco’s losses hit Sun Pharma’s valuation - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 27, 2000

    Caraco’s losses hit Sun Pharma’s valuation

    Sun Pharmaceuticals manufactures formulations in niche segments such as psychiatry, cardiovascular, gastroentology and neurology. It has been among the fastest growing pharmaceutical companies over the last three years. The promoters hold around 74% of the equity of the company.

    Sun has been extremely aggressive in the launch of new products with almost 24 new product launches in its niche areas, slated for the current year itself (10 of these have already been launched). These are expected to help the company achieve an over 25% growth in the coming year too. The company derives almost 40% of its revenues from products introduced in the past five years. Consequently its exposure to revenues accruing from products under the DPCO is a relatively low 19% of domestic formulation sales.

    Over the years Sun has used the strategy of acquisitions and mergers to grow quickly. It acquired Knoll Pharma’s bulk drug facility, Gujarat Lyka Organics, 51.5% in M. J. Pharma, merged Tamil Nadu Dadha Pharma, acquired Natco’s brands and merged Milmet Labs.

    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.

    Perhaps the only area of concern is the continuing losses of its US based affiliate Caraco Pharma, which is the company’s vehicle for launch of generics. (Sun has invested $ 12.8 m – $ 7.5 m towards equity and $ 5.3 m towards debt in Caraco, which has registered a loss of over $ 9.5 m for the year ended December 1999.) Caraco has submitted around nine abbreviated new drug applications (ANDA) which are awaiting US FDA approval. Besides, Caraco needs further cash infusion for which it is planning to raise debt in the US market. Sun has however not provided for this dimunition in the value of its investments.

    The last time that we wrote about the stock we had mentioned that: “Sun Pharma has changed gears alright. What remains to be seen is whether the company is able to sustain its profitability.” This was at a price of Rs 607.

    The stock has come off almost 25% to its current levels of 464. The fall in valuation is partially due to the fact that the overall valuations in the market have come down over the last one week and partially due to the concerns over Caraco’s losses.

    The management has already stated its intention to amalgamate Sun Pharma Exports, the company’s 100% subsidiary into Sun Pharma. This would add roughly another Rs 150 to the company’s expected profits of Rs 1134 m in FY2001. The per share earnings work out to around Rs 20 and this implies an earning multiple of 23.2 at current valuations.

     

     

    Equitymaster requests your view! Post a comment on "Caraco’s losses hit Sun Pharma’s valuation". Click here!

      
     

    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    Sun Pharma: Slow Growth Across Major Markets (Quarterly Results Update - Detailed)

    Mar 11, 2017

    Sun Pharma has announced its December quarter (3QFY17) results. The company has reported 8% YoY growth in sales and a decline of 4.7% YoY in the net profits.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    SUN PHARMA SHARE PRICE


    Aug 17, 2017 (Close)

    TRACK SUN PHARMA

    • Track your investment in SUN PHARMA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    SUN PHARMA 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE SUN PHARMA WITH

    MARKET STATS