Sun Pharma?s FY14 annual report provides good visibility on the key pillars of growth which includes enhancing its pipeline of complex/specialty products for the US and successfully turning around Ranbaxy?s operations.
Future focus will be on building a differentiated product basket, foraying into products that yield stable and consistent cash flows. At the same time, the company continues to be on the lookout for value enhancing inorganic opportunities in the US.
The India subsidiary created last year (Sun Pharma Global) has shown a PBT of Rs 340 crore versus a negative PBT of Rs 130 crore in FY13.
URL Pharma did sales of Rs 1760 crore with PAT of Rs 600 crore (margins of ~30). A significant part of URL Pharma performance in FY14 was driven by favourable pricing for key products and re-launch of some of the discontinued products from URL?s portfolio. Recently, prices of some of these products have normalised significantly and hence a part of URL Pharma?s performance may not be sustainable in our view.
Dusa Pharma reported sales of Rs 430 crore versus Rs 97.5 crore in FY13 (consolidated for three months) while it turned profitable in FY14 (Rs 23.7 crore vs loss of Rs 4.7 crore in FY13). This was driven by greater penetration with dermatologists and gradual price increases.
The company is carrying hedges of $240m with MTM loss of Rs 200 crore classified as long-term provision. This implies hedges are for a period of over one year, largely hedged in the range of 50-52.
We maintain a buy rating on the scrip with a revised target of Rs 980 which includes upsides from Ranbaxy?s business.
Motilal Oswal
