Is Sun Pharmaceutical Industries a solid growth stock? - The numbers tells it is
05-06-2015 • About Sun Pharmaceutical Industries (
$SUNPHARMA) • By InTwits
Pay attention to Sun Pharmaceutical Industries as a growth stock. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.
Growth story
Sun Pharmaceutical Industries showed growth in the last financial year. The company's revenue surged on 70.2% in FY2015. In addition to revenue Sun Pharmaceutical Industries also keeps delivering EBITDA growth. It was 10.7% in FY2015
In the longer period the company showed fast revenue growth of 50.4% from FY2012 to FY2015 annually. EBITDA surged on 34.6% from FY2012 to FY2015 annually.
Sun Pharmaceutical Industries ($SUNPHARMA) financials for the last 5 years
| mln. INR | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Revenue | 57,216 | 80,054 | 112,389 | 160,044 | 272,451 |
|---|
| Revenue growth, % | | 39.9% | 40.4% | 42.4% | 70.2% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 19,631 | 32,676 | 49,749 | 71,906 | 79,635 |
|---|
| EBITDA growth, % | | 66.4% | 52.2% | 44.5% | 10.7% |
|---|
| EBITDA margin, % | 34.3% | 40.8% | 44.3% | 44.9% | 29.2% |
|---|
| Net Income | 18,161 | 26,567 | 29,831 | 31,415 | 45,394 |
|---|
| Net Income margin, % | 31.7% | 33.2% | 26.5% | 19.6% | 16.7% |
|---|
| |
| CAPEX | 4,219 | 7,129 | 8,455 | 9,060 | 23,419 |
|---|
| CAPEX/Revenue, % | 7.37% | 8.91% | 7.52% | 5.66% | 8.60% |
|---|
| Debt | 4,256 | 3,207 | 2,597 | 25,609 | 89,961 |
|---|
| Cash | 8,105 | 17,527 | 20,691 | 43,587 | 72,856 |
|---|
| Net Debt/EBITDA | -0.2x | -0.4x | -0.4x | -0.3x | 0.2x |
|---|
| |
| ROIC, % | 18.9% | 24.8% | 31.1% | 35.0% | 23.0% |
|---|
| ROE, % | 21.0% | 24.5% | 21.9% | 18.7% | 20.6% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. If we look for the longer period the company showed big decline in EBITDA margin of 11.6 pp from 40.8% in FY2012 to 29.2% in FY2015.
Sun Pharmaceutical Industries shows attractive ROIC at 23.0% for the last 12 months which assumes stable development model. Three years ago it was a bit higher at 24.8%. It's average ROIC for the last three years was 29.7%.
Sun Pharmaceutical Industries showed big decline in Net Income margin of 2.90 pp from 19.6% to 16.7% in FY2015. In the last 3 years Sun Pharmaceutical Industries showed big decline in Net Income margin of 16.5 pp from 33.2% in FY2012 to 16.7% in FY2015.
Sun Pharmaceutical Industries operates at ROE of 20.6%. Average ROE for the last three years was 20.4%.
Capital expenditures (CAPEX)
To this fast growth the company had to invest in CAPEX.The company's CAPEX/Revenue was 8.60% in FY2015. CAPEX/Revenue decreased slightly on 0.310 pp from 8.91% in FY2012 to 8.60% in FY2015. It's average level of CAPEX/Revenue for the last three years was 7.26%.
Leverage (Debt)
The company has low debt level at 0.2x Net Debt/EBITDA - at the same time with high growth. If we look for the longer period the company showed fast leverage growth of 0.65x from -0.44x in FY2012 to 0.21x in FY2015.
Valuation vs. comparable companies
The company trades at 25.8x EV/EBITDA which is not surprisingly 45.1% higher than 17.8x Pharmaceuticals industry avearge calculated based on 266 companies. The company trades at 44.9x P/E which is 16.9% lower than 54.1x Pharmaceuticals industry avearge calculated based on 22 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 36.6x EV/(EBITDA-CAPEX) which is not surprisingly 1,560% higher than 2.2x Pharmaceuticals industry avearge calculated based on 17 companies.
Peers in Pharmaceuticals
Below we provide Sun Pharmaceutical Industries benchmarking against other companies in Pharmaceuticals industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Granules India ($GRANULES) | | 37.6% | 16.9% | 43.4% | 18.1% |
| Marksans Pharma ($MARKSANS) | -66.6% | 16.7% | 23.3% | 43.3% | |
| Torrent Pharmaceuticals ($TORNTPHARM) | | 22.7% | 17.7% | 32.2% | 13.6% |
| Abbott India ($ABBOTINDIA) | | 8.2% | 8.7% | 27.3% | 2.6% |
| Sharon Bio-Medicine ($SHARONBIO) | -37.2% | 28.3% | 33.5% | 23.4% | |
| |
|---|
| Median (41 companies) | -37.4% | 16.6% | 14.7% | 12.6% | 10.4% |
|---|
| Sun Pharmaceutical Industries ($SUNPHARMA) | | 39.9% | 40.4% | 42.4% | 70.2% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top |
|---|
| Dr.Reddy'S Laboratories ($DRREDDY) | | | 52.1% | 57.4% | 57.6% |
| Omega Laboratories ($OMEGALAB) | | 0.0% | 0.0% | 0.0% | 0.0% |
| |
|---|
| Median (2 companies) | | 46.9% | 26.1% | 28.7% | 28.8% |
|---|
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Divi'S Laboratories ($DIVISLAB) | 38.1% | 37.2% | 38.2% | 40.2% | 37.4% |
| Hester Biosciences ($HESTERBIO) | | | | | 32.9% |
| Natco Pharma ($NATCOPHARM) | 21.3% | 21.5% | 23.2% | 24.9% | 26.2% |
| Dr.Reddy'S Laboratories ($DRREDDY) | 21.7% | 25.8% | 22.9% | 25.1% | 23.2% |
| Claris Lifesciences ($CLARIS) | 33.6% | 34.7% | 27.6% | 21.1% | 22.7% |
| |
|---|
| Median (39 companies) | 16.2% | 12.7% | 12.8% | 14.3% | 13.8% |
|---|
| Sun Pharmaceutical Industries ($SUNPHARMA) | 34.3% | 40.8% | 44.3% | 44.9% | 29.2% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Claris Lifesciences ($CLARIS) | 32.5% | 58.1% | 42.9% | | 103.1% |
| Wintac ($WINTAC) | | | | | 22.8% |
| Hester Biosciences ($HESTERBIO) | | | | | 21.5% |
| Natco Pharma ($NATCOPHARM) | 20.0% | 24.4% | 16.3% | 14.4% | 14.1% |
| Granules India ($GRANULES) | 5.3% | 8.8% | 15.2% | 24.3% | 11.4% |
| |
|---|
| Median (27 companies) | 7.4% | 7.7% | 8.3% | 5.8% | 6.2% |
|---|
| Sun Pharmaceutical Industries ($SUNPHARMA) | 7.4% | 8.9% | 7.5% | 5.7% | 8.6% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Alembic Pharmaceuticals ($APLLTD) | | 27.5% | 29.1% | 41.5% | 35.7% |
| Marksans Pharma ($MARKSANS) | -25.8% | -142.4% | 34.9% | 33.8% | |
| Torrent Pharmaceuticals ($TORNTPHARM) | 22.3% | 26.4% | 30.5% | 33.2% | 19.7% |
| Jenburkt Pharmaceuticals ($JENBURPH) | 43.6% | 34.1% | 29.0% | 32.4% | 35.3% |
| Divi'S Laboratories ($DIVISLAB) | 25.6% | 30.6% | 30.4% | 32.3% | 30.5% |
| |
|---|
| Median (63 companies) | 13.5% | 13.7% | 13.2% | 14.4% | 13.3% |
|---|
| Sun Pharmaceutical Industries ($SUNPHARMA) | 18.9% | 24.8% | 31.1% | 35.0% | 23.0% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Ind-Swift Laboratories ($INDSWFTLAB) | 4.6x | 5.5x | 16.1x | 19.5x | 0.0x |
| Shasun Pharmaceuticals ($SHASUNPHAR) | 4.5x | 2.8x | 4.5x | 6.0x | 6.2x |
| Sharon Bio-Medicine ($SHARONBIO) | 4.6x | 4.7x | 5.3x | 4.5x | |
| Jubilant Life Sciences Limited ($JUBILANT) | 5.3x | 4.0x | 3.5x | 3.5x | 6.4x |
| Kopran ($KOPRAN) | 6.0x | 4.5x | 3.0x | 3.0x | 2.4x |
| |
|---|
| Median (50 companies) | 1.6x | 1.6x | 1.4x | 0.5x | 0.6x |
|---|
| Sun Pharmaceutical Industries ($SUNPHARMA) | -0.2x | -0.4x | -0.4x | -0.3x | 0.2x |
