Sun Pharma shares tank over 8% on lower-than-expected Q4 result, experts upbeat

Sun Pharmaceutical Industries shares tanked 9 per cent after the announcement of lower-than-expected fourth quarter result. For the quarter ended March 2015, the company reported a net profit of Rs 888.05 crore, down 44.05 per cent, against Rs 1,587.12 crore in the corresponding quarter a year ago.

However, gross sales of the company jumped 51.97 per cent year-on-year (yoy) to Rs 6,144.90 crore at the end of the quarter under review. Total expenditure of the company increased by 133.15 per cent y-o-y to Rs 5,264.66 crore.

According to research report by KR Choksey, Sun Pharmaceutical posted Q4 FY15 consolidated results after integration with Ranbaxy which were below our estimates on account of temporary supply constraints at its Halol plant.

Sarabjit Kour Nangra, VP research, pharma, Angel Broking, says, "Sun Pharmaceutical posted sales of Rs 6,145 crore which is below our expectation of Rs 7,000 crore. We believe the situation will improve for Sun Pharmaceutical by 2016-17 and the share price can touch can touch Rs 1,064."

Operating profit declined by 50.4 per cent yoy to Rs 892 crore and margins were 14.5 per cent due to higher expenses related to professional charges, harmonisation of policies of erstwhile Ranbaxy with the company.

As per the latest AWACS report, the company holds 9 per cent market share in India and continues to be ranked no. 1 in prescription market share with 7 classes of specialists: psychiatry, neurology, cardiology, ophthalmology, orthopedics, nephrology, diabetology, urology, chest physicians, consultant physicians and gastroenterology.

Domestic formulation business showed growth of 65.8 per cent y-o-y.

KR Choksey has 'hold' rating  on the scrip of Sun Pharmaceutical. The brokerage house said, " We believe margins to remain under pressure in near term due to integration expenses and ongoing remediation effort at Halol plant. We expect synergies from Ranbaxy merger to arise from 2016-17 onwards. Management has guided operating synergies of $250 million from 2017-18. The share price can touch Rs 966 in the next few quarters."

In the previous financial year, the company filed 12 ANDAs (five in the last quarter of 2014-15 resulting in higher R&D expense) and 1 NDA and received 3 approvals. Till date the company has 35 ANDAs and 1 NDA awaiting USFDA approval.

Sun Pharmaceutical shares closed at Rs 878.95 on Monday. It opened the day at Rs 916, touched a high and low of Rs 918 and 869.50, respectively.