Views on Sun Pharma 2QFY2016 Results: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - Pharma, Angel Broking) on Sun Pharma 2QFY2016 Results:

"Sun Pharma posted results marginally lower than expected. For 2QFY2016, the company posted sales of INR 6803cr V/s INR 6600cr estimated a dip of 15% YoY. Amongst the key markets - India (INR 1819cr) posted a growth of only 1%, US-(US$ 510mn) posted a de-growth of 28% YoY, Emerging markets (US$ 140mn) were down by 16% YoY and ROW( US$ 76mn) were down 30%. In India, the sales growth was adversely impacted due to conscious efforts to control overall inventory with the trade. In addition, sales in the acute segment were lower due to withdrawal of bonus offers and a relatively soft season for the acute segment. Sales for the quarter in US were impacted primarily due to competitive pressure on some products and temporary supply constraints arising from remediation efforts at the Halol facility. The Company had benefitted significantly in 2QFY2015 from the 180-day exclusivity on Valsartan tablets in the US resulting in a higher base.

On the operating front, the company posted an OPM of 27.9% V/s 38.0% in 2QFY2015. This was against the expectations of 25.4%. The company had benefitted significantly in 2QFY2015 from the 180-day exclusivity on Valsartan tablets in the US resulting in a higher base. Thus, the net profit came in at INR 1107cr V/s INR 1145cr expected and INR 2051cr in 2QFY2015, a YoY dip of 46.0%. Other income during the quarter came in at INR 225.6cr V/s INR 29.1cr in 2QFY2015.

Also, the company's Halol plant has been reported to have got an OAI (Official Action Indicated). According to the USFDA, an OAI (Official Action Indicated) inspection classification means significant objectionable conditions or practices were found and regulatory action is warranted to address the establishment's lack of compliance with statutes or regulations. With Halol plant likely to get into more trouble, we believe that same will play in its US business. Company Management informed investors that the company has submitted an original remediation plan for Halol to the USFDA and kept the agency updated on the progress "at great frequency". Thus, the overall difficulty levels for the Halol plant has increased and thus impact on the US sales. However, we are currently maintaining our estimates and our target price of INR 950."

Shares of SUN PHARMACEUTICAL INDUSTRIES LTD. was last trading in BSE at Rs.803.7 as compared to the previous close of Rs. 815.85. The total number of shares traded during the day was 267373 in over 10925 trades.

The stock hit an intraday high of Rs. 822 and intraday low of 800. The net turnover during the day was Rs. 216195920.

Source : Equity Bulls

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