Sun Pharma’s 4QFY2009 numbers were above our Expectations. The company posted net sales of Rs1134.4 crore, dipping by 9.8%.
The decline in sales was mainly on account of a very high base in the corresponding period last quarter, contributed by the launch of Protonix generic.
Domestic segment grew at a healthy pace of 76.1% to Rs674 crore, constituting 58.3% of the total sales for the period.
For FY2009, the company has posted net sales of Rs4272.3 crore, a y-o-y rise of 27.3%, with exports registering a y-o-y growth of 21.9% and contributing 52.8% of the overall sales.
On the operating front, the margin came in at 33.0% a dip of 25.9%. The decline in the operating margins came on back of a 543bp dip in the gross margins and a substantial rise in the staff cost and other expenditure, which rose by 51.7% and 91.7%, respectively.
For 4QFY2009, the Net profit came in at Rs394.4cr, a dip of 45.4%, driven mainly by sales decline and reduction in the OPM’s.
For FY2009, the company has posted a net profit of Rs1,817 crore, up 22.3% y-o-y, driven by robust topline growth of 27.3% y-o-y.
Outlook and valuation
During FY2009, the performance of the company was driven by the sales of the generic version of Protonix and robust growth in the domestic formulation segment.
However, going into FY2010, with subdued sales from the said product we expect a moderation in the overall topline growth of the company and also its corresponding impact on the overall profitability.
Without considering a one-off opportunity, the Management has guided towards a 13-15% growth in the Topline; however, we expect the company to clock a sales growth of 8.8% during the period and would monitor its performance before revising our FY2010 numbers.
We have also introduced our FY2011 numbers and expect the company to post an 11.6% and 11.4% growth on the sales and net profit front, respectively.
On the valuation front, at Rs1219, the stock is trading at 16.0x FY2010E and 14.4x FY2011E earnings. We maintain a BUY on the stock with price target of Rs1,526.