Sun Pharmaceuticals Industries Ltd.

Sun Pharma enjoys the status of being the fifth largest pharma company in the world and the largest generic drug maker in India. With the market cap of more than `2 trillion, the company has presence spanning across 150 countries across branded and generic markets. Sun Pharma is having a strong product pipeline in the US market, with 159 products fillings awaiting USFDA approval. Overall, the company has filled for 1,598 patents, while revived patents approval of 951 till FY15. Ranbaxy acquisition marked the biggest takeover for Sun Pharma. In the near-term integration issues will surround the company to some extent. However, consistent outperformance in the domestic market with market share gains and high profitability reflect management’s execution capability (and product selection skills).

Valuation and view

Ranbaxy acquisition marked the biggest takeover for Sun Pharma. In the near-term integration issues will surround the company to some extent. However, consistent outperformance in the domestic market with market share gains and high profitability reflect management’s execution capability (and product selection skills). Identification of value-accretive assets and integrating them successfully has been one of the cornerstones of the company’s success. So we believe that the company will be able to turnaround its profitability in the future.

At a current market price (CMP) of Rs 867, the stock trades at a P/E of 17.5x FY16E and 11.2x FY17E. We recommend ‘BUY’ with a target price of Rs 1,010, which implies potential upside of ~17% to the CMP from long term perspective.

Research Report Sun Pharmaceuticals Industries Ltd

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