India's third-largest pharma company is batting on a strong wicket. Sun reported an annual revenue growth of 27 per cent and profit growth of 18 per cent in the last five years. Current Ebitda margin at 44.3 per cent is one of the highest in its sector. In fact, so strong and consistent has been Sun's performance that the stock is up 53 per cent this year. And the best part is that even if you haven't latched on to Sun yet, you can still join the party.
Why you should add Sun Pharma to your portfolio?
The primary driver of Sun's outperformance has been the strong momentum of its US sales which now constitute 61 per cent of sales. Sun's own strengths in the US have been augmented over the years with its acquisitions, especially that of Israel-based Taro. Sun and Taro together have filed 453 ANDAs (Abbreviated New Drug Application) of which 320 have been approved. Sun's pipeline of ANDA filings is the largest in the country and will likely keep the company ahead of its domestic peers in the US market.
Sun has a strong domestic base too. It is the country's third-largest formulations company with a market share of 5.1 per cent. Domestic business is currently growing at 11 per cent. The recent implementation of the National Pharmaceuticals Pricing Policy (NPPP) will hit Sun too. It could take a hit of around Rs 40-50 crore per year as a result.
The only negative bit of news for Sun came when it was required to pay a huge sum of $550 million (around Rs 3,630 crore) as part of the terms of settlement with Pfizer.
The stock came under an initial shock but with a cash balance of Rs 9,000 crore as of June 2013, the outgo seems more than covered. There were even earlier market fears that this settlement would put the brakes on Sun's acquisition plans but the company in a recent concall reiterated that it was indeed looking at companies to pick up in the US.
This article was originally published on November 25, 2013.
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