-------- Forwarded Message --------
Subject: Sun Pharma:The Management May Be Over Cautious Over Its Dismal
Guidance---Below 785, Good Demand Zone Might Be 765-750
Date: Wed, 22 Jul 2015 09:00:16 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
To: undisclosed-recipients:;
Looking at the chart, Sun Pharma (CMP:805) has immediate support of
793-785 and only sustaining below that it may further fall to 765-750
zone. Only consecutive closing below 750, Sun Pharma might fall further
towards 725-700-680-650-625-610 area in the worst bear case scenario.
On the upside, sustaining over 807-815 zone, immediate to short term
target may be 830-836-851 and 862-872-885-900-912. Sustaining above 912,
Sun Pharma may scale 935-960*-970 in the mid term and consecutive
closing above that 1000-1012 & 1041-1075 and 1125-1200 might be the
target in the long term.
In brief, technically for Sun Pharma, 785-765-750 might be very good
demand zone and 960-970-1010 may be a good supply zone in the near term.
Bottom Line: Technical Trading Levels (Positional)
SL</>10 FROM SLR
Sun Phm CMP 805
T1 T2 T3 T4 T5 T6 T7 SLR
Strong > 795 807-815 830-836 851-862* 872-885 900-912*
935-960* 970-1012 <785
Weak < 785 765-750* 735-725 700 680 650
625 610 >795
We all know, on Monday in a con call (after market hours), the Sun
Pharma management lowered its guidance for FY-16 citing reasons for one
time integration costs with Ranbaxy, ghosts of FDA at some of its
Ranbaxy plants (specially Halol) and consequent prolonged impact of
remediation measures there along with divestiture of low margin assets
(to discontinue some unprofitable Ranbaxy products). Also higher
investments in R&D could further put pressure on margins.
Going by the commentary of the management, it may be over cautious in
its guidance and the market is also expecting such scenario given the
dismal set of Q1 (March) numbers with no FY-16 guidance. Even now,
rather than a number, its guidance only indicates that top line will
either be flat or decline compared to FY-15 and bottom line could be
adversely affected due to some one time charges related to Ranbaxy.
The silver lining is that Sun Pharma expects things to look up after
FY-17 with sustainable growth in business in the countries it operates
in. The product rationalization/culling may result in higher
profitability than before. It is also projecting 15-20% increase in
merger related synergies and expecting the over all merger with Ranbaxy
will be EPS accretive from FY-17 onwards. Also, apart from Halol, it is
planning to set/redesign all the controversial plants with Ranbaxy to be
FDA compliant gradually one by one. But this issue of FDA ghosts will be
more clear towards the end of FY-16.
Halol plant contributes around 10% sales of Sun Pharma and by FY-17, if
the FDA issue is resolved, then we may see some improvements in its
bottom line (being a cost effective plant). It has also good &
profitable product launches in the pipeline in the near future.
Looking ahead, the whole merger issue with Ranbaxy may be debatable as
"sheer arrogance of money" along with investments in Suzlon by Sanghvi
brothers. But at the end of the day, Ranbaxy was a good business in
distress for lack of proper management & disclosures. Acquisition swap
ratio & procedure may also be not right. For the time being, Ranbaxy may
be a severe cause of pain, but as the business fundamentals of Sun
Pharma is quite good, it may be temporary. Selling in Sun Pharma may be
over done in a single day and smart money might accumulate it in any
unusual declines.
Sun Pharma issue may be another example of "Good business in temporary
distress".
As par BG metrics, current median valuation of Sun Pharma may be around
825 and its projected fair valuations might be around 950-1100-1250
(FY:16-18) in the current market parameters.
SCRIP EPS(TTM) BV(Act) P/E(AVG) LONG TERM SHORT TERM MEDIAN
VALUE 200-DEMA 10-DEMA
SUNPHARMA 21.93 77.12 34.5 817.95 825.92 821.93 884.29 901.6
SUNPHARMA 29.27 91.75 34.5 944.97 954.17 949.57 884.29 901.6
SUNPHARMA 39.08 109.5 34.5 1091.90 1102.54 1097.22
884.29 901.6
SUNPHARMA 50.05 130.35 34.5 1235.69 1247.72 1241.71
884.29 901.6
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--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.com)
NCFM-TA Certified
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