Sun Pharma: Impressive results, attractive valuation - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • Oct 19, 2000 - Sun Pharma: Impressive results, attractive valuation

Sun Pharma: Impressive results, attractive valuation

Oct 19, 2000

Sun Pharma has reported results as per expectations with net profits up 41% on the back of 35% growth in the topline. The topline has been led by a 79% increase in bulk drug sales apart from a 20% increase in the formulation sales. This is due to the fact that Gujarat Lyka (which produces bulk drugs) has been amalgamated with Sun Pharma in the current year. This also explains the drop in operating margins since the contribution of bulk drugs to the total turnover has increased to 32% in the current year from 24% last year.

(Rs m) 2QFY00 2QFY01 Change
Sales 1,129 1,519 34.5%
Other Income 6 33 469.0%
Expenditure 856 1,179 37.8%
Operating Profit (EBDIT) 273 340  
Operating Profit Margin (%) 24.2% 22.4%  
Interest 6 (6) -198.4%
Depreciation 30 35 16.6%
Profit before Tax 243 344 41.9%
Other Adjustments      
Tax 15 22  
Profit after Tax/(Loss) 228 322 41.3%
Net profit margin (%) 20.2% 21.2%  
Earnings per share* 19.50 27.56  
(annualised)      

However, the growth in formulation sales by 20% is impressive when seen in the light of the fact that the overall industry growth for the first five months has been in the range of 11% only. Sun Pharmaceuticals manufactures formulations in niche segments such as psychiatry, cardiovascular, gastroentology and neurology.

What is particularly encouraging for the company is the fact that formulation exports have picked up in the second quarter. Overall formulation exports in the second quarter (this includes the performance of its 99.38% subsidiary Sun Pharmaceutical Exports) have risen by almost 50% in the second quarter vis-ŕ-vis a 39% growth in the full first half. Thus the company has successfully fine–tuned its strategy of exports of finished dosage forms.

Also, Sun has been extremely aggressive in the launch of new products in the domestic market with almost 24 new product launches in its niche areas, slated for the current year itself (10 of these have already been launched). 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.

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 Rs 288.63 m towards equity and Rs 252.86 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 in the current year as the management feels that in view of the future growth potential and long term nature of investments.

The stock has come off almost 25% over the last six months to its current levels of 448. 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 its US–based affiliate Caraco’s losses. At the current valuation the stock rules at 16.25 times FY2001 earnings.

The management has already stated its intention to amalgamate Sun Pharma Exports, the company’s 99.38% subsidiary into Sun Pharma. This would add roughly another Rs 130 m to the company’s expected profits of Rs 1265 m in FY2001. The per share earnings work out to around Rs 29.85 and this implies an earning multiple of 15 at current valuations. If one were to deduct the entire losses accrued by Caraco so far (i.e. Rs 437 m) the earnings work out Rs 20.50 and the current stock price implies an earnings multiple of 22 times.


Equitymaster requests your view! Post a comment on "Sun Pharma: Impressive results, attractive valuation ". Click here!

  

More Views on News

SUN PHARMA Announces Quarterly Results (4QFY20); Net Profit Down 31.6% (Quarterly Result Update)

May 28, 2020 | Updated on May 28, 2020

For the quarter ended March 2020, SUN PHARMA has posted a net profit of Rs 5 bn (down 31.6% YoY). Sales on the other hand came in at Rs 82 bn (up 14.3% YoY). Read on for a complete analysis of SUN PHARMA's quarterly results.

SUN PHARMA Announces Quarterly Results (3QFY20); Net Profit Down 29.8% (Quarterly Result Update)

Feb 7, 2020 | Updated on Feb 7, 2020

For the quarter ended December 2019, SUN PHARMA has posted a net profit of Rs 10 bn (down 29.8% YoY). Sales on the other hand came in at Rs 82 bn (up 5.4% YoY). Read on for a complete analysis of SUN PHARMA's quarterly results.

SUN PHARMA 2018-19 Annual Report Analysis (Annual Result Update)

Aug 6, 2019 | Updated on Aug 6, 2019

Here's an analysis of the annual report of SUN PHARMA for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of SUN PHARMA. Also includes updates on the valuation of SUN PHARMA.

SUN PHARMA 2017-18 Annual Report Analysis (Annual Result Update)

Dec 20, 2018 | Updated on Dec 20, 2018

Here's an analysis of the annual report of SUN PHARMA for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of SUN PHARMA. Also includes updates on the valuation of SUN PHARMA.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

SUN PHARMA SHARE PRICE


Sep 29, 2020 (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 8-QTR ANALYSIS

COMPARE SUN PHARMA WITH

MARKET STATS