India’s third-largest pharma company, Sun Pharma’s revenues have grown by over 40 per cent annually in the last 3 years. Ebitda margins at 44.2 per cent are one of the highest both in its sector and among most large companies operating in India. And it is also the stock market’s poster-boy -- having gained over 80 per cent in the last 12 months.
How does the rupee depreciation help?
Around 74 per cent of Sun’s revenues are dollar denominated. It does not have any foreign currency debt on its books. The rupee depreciation as a result could see Sun’s earnings per share expand by 4.6 per cent in FY15 (Motilal Oswal estimates). In the US, it now has one of the largest ANDA pipelines among Indian companies. Sun currently has 138 products in its Abbreviated New Drug Application (ANDA) pipeline -- its closest competitor Lupin has 98.
Acquisitions of URL Pharma (US) and Taro (Israel) gives Sun a beach-head in lucrative dermatology market of the US. Launches expected in the next 12-18 months in this vertical should help keep the company fire its momentum. In India, Sun now has a 4.5 per cent market share which makes it the third-largest domestic pharma company. Sun has made significant inroads in gastro, cardiology, diabetes and Central Nervous System. Sun is also one of the few domestic pharma companies that has demonstrated a track record of success in international acquisitions, Between FY05-13, Sun has made as many as eight acquisitions world-wide.
Watch out for: Sun recently took a hit of $550 million (approximately ₹3,178 crore) as settlement of the Protonix case with Pfizer. The large outgo amounts to around 60 per cent of Sun’s standalone cash of ₹4,000 crore (FY13) and could impact Sun’s immediate acquisition ambitions. But with projected cash inflows of ₹6,100 crore in FY14 (Ambit estimates), Sun may not be down for long.