MOSL: SUN PHARMA (Buy)-Impacted by distribution change-on path to build specialty portfolio
Sun Pharma: Impacted by distribution change; on path to build specialty portfolio
(SUNP IN, Mkt Cap USD14.2b, CMP INR413, TP INR480, 16% Upside, Buy)
- Change of distribution in India impacts earnings: On reported basis, sales at INR70b, up 5% YoY, while, EBITDA/PAT at INR9.5b/INR6b is down 33%/51% YoY for the quarter. We note that SUNP’s financials were adversely impacted by the change of its distribution in the domestic formulations (DF) business (sales down 44% YoY to INR11b; 16% of sales) from Aditya Medisales to its wholly owned subsidiary. US sales grew 20% YoY to USD443m (44% of sales), led by a considerable order from a US-based customer for generic supply (which would be for a period six months starting 4QFY19). Excluding the impact from the aforementioned factors (as shown in Exhibit 2), sales/EBITDA/PAT would have been INR76b/INR14b/INR9b v/s our estimate of INR74b/INR17b/INR10b.
- FY19 performance: Sales/EBITDA/PAT stood at INR287b (+10% YoY)/INR57.5b (+11% YoY)/INR36.3 (+12% YoY).
Sun Pharmaceutical and its subsidiaries are principally engaged in developing, manufacturing and marketing generic pharmaceutical products and bulk drugs. Co.'s products are mainly for the following therapy areas: psychiatrists, neurologists, gastroenterologists, diabetologists, chest physicians, consultant physicians, orthopedics, oncologists, gynecologists, ophthalmologists and cardiologists. Generic names of three principal products of Co. is Pentoxifyline, Pentoparzole Sodium, and Metformin Hydrochloride. Co.'s business can be divided into four segments: Indian branded generics, U.S. generics, international branded generics (ROW) and Active Pharmaceutical Ingredients (API).
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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