MOSL: SUN PHARMA (Buy)-In-line-ramp-up of specialty portfolio – WIP
Sun Pharma: In-line; ramp-up of specialty portfolio – WIP
(SUNP IN, Mkt Cap USD14.9b, CMP INR440, TP INR515, 17% Upside, Buy)
- Revenues driven by India/ROW: SUNP's sales increased 16% YoY to INR79.5b (in-line) in 2QFY20, mainly driven by strong growth in India and RoW sales. India sales were up 35% YoY to INR25b (32% of sales), led by the robust outperformance to industry and partially led by a low base. RoW sales were up 49% YoY to USD161m (16% of sales), led by organic growth and the integration of Pola Pharma Japan. However, the business was dragged to some extent by flat YoY US sales (30% of sales) at USD339m, with Taro posting sales of USD161m (+1% YoY). Emerging Markets (EM) sales were up 3% YoY at USD201m (18% of sales).
- Inferior product mix offset by controlled cost: Gross margin contracted 280bp YoY (+130bp QoQ) to 71.5%, mainly due to the change in the product mix and the distribution transition in India. EBITDA margin shrank at a lower rate of 80bp YoY to 20% (our estimate: 21%) due to controlled opex with lower employee/R&D cost (-110bp/100bp YoY). EBITDA was up 11% YoY at INR16.1b (in-line). Adj. PAT increased marginally by 3% YoY to INR10.6b (in-line) due to a higher tax rate.
- For 1HFY20, revenue/EBITDA/PAT were up 16%/15%/19% YoY to INR162b/INR34b/INR24b.
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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