Sun Pharmaceutical Industries - Buy

Sun Pharmaceutical Industries
CMP - 1,021.55

Unlike its peers whose performance hasbeen mixed, Sun Pharma has not only been consis 240, tent in its growth, but it has also managed to improve its performance over the years. Its net worth has,grown steadily by 28 per cent and revenues by 33 per cent on an average over the last ten years. Profit has grown even more impressively at an average 37 per cent (CAGR) over the period and average profit margins have stayed close to 24 per cent. Shareholders haven’t had much to complain about, as the average RoE has been close to 31 per cent over the ten years. Around 72 per cent of Sun’s domestic revenues come from products for lifestyle related diseases. The demand for drugs to treat diabetes (which has grown at 16 per cent CAGR) and cardiovascular diseases (15 per cent CAGR) is expected to grow the fastest in the therapy segment in 2007-11 and this will benefit Sun Pharma. The company has maintained its revenue guidance for the current year, notwithstanding the cautious outlook of its subsidiary Caraco Pharmaceuticals for business in the US. Sun’s base business growth is on track with domestic formulations and bulk business (domestic and exports) continuing to post strong growth. Branded generics exports are likely to be the incremental growth drivers. The stock has declined just 4 per cent in the past year. It is trading at EV/Ebitda of lix and 1 2x of its FY09 and FY10 earnings.