Techno Funda Pick

April 22, 2015

Time frame: 6 months

Sun Pharmaceuticals (SUNPHA) CMP- | 952.00

Key Technical Data

Recommended Price

930-945

Price Target

1090.00

Stoploss

855.00

52 Week High

1200.80

52 Week Low

572.00

50 days EMA

1012.00

200 days EMA

868.00

52 Week EMA

847.00

*Recommendation given on i-click to gain on April 21, 2015

at 11:28 hrs at then market price of | 943

Stock price movement vs. BSE Sensex

1,260
1,160
1,060
960
860
760
660
560

Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
Sun Pharma

BSE Sensex

100%
80%
61%

48%

40%
20%

54%

46%

2%

0%
2010

2011

2012
Year

2013

The share price of Sun Pharmaceuticals has approached its key value area on Tuesday amid stake sale by foreign
co-promoter at a discount to market price. We believe that the current decline has not altered the larger structural
fabric of the long term trend for the stock. The larger degree price chart remains firmly bullish hence we believe
the current reversion of price to key support area offers a lucrative buying opportunity for medium term investors
to ride the structural up trend
The stock witnessed a strong run up from its May 2014 lows of | 547 to post a life-time high of | 1200 in early
April 2015. The steep correction of ~ 22% from the life high over past two weeks has led stock price towards key
value area placed near | 930 levels being the confluence of following technical parameters:

o
o

The long term rising trend line connecting significant lows of June 2014, January 2015 and February
2015 is placed at | 930 levels
The 80% retracement of preceding up leg during February 2015 April 2015 (| 860 1200) is placed at
| 930
Among medium term moving averages the rising 21-week EMA is currently placed at | 952 levels

The entire up move since June 2014 is backed by higher volumes (50-week average volumes have been 20%
higher than its 200-week average of 0.9 crore shares per week). As per Dow Theory principle, volumes expanding
in direction of primary trend corroborates the overall bullish stance
Considering the overall positive price structure and placement of the stock at important support region, we
believe the stock offers a good entry opportunity with decent reward/risk set-up. We expect the stock to bottom
out at current levels and resolve higher to retrace the recent decline (|1200 to |930) by minimum 61.8% over the
coming months which opens the room for a rally towards | 1090 levels over the medium term horizon

Price performance over last five years

60%

Stop loss: | 855.00

Key technical observations

o
29,000
28,000
27,000
26,000
25,000
24,000
23,000
22,000

Buying range: | 930.00-945.00 Target: | 1090.00

2014

Among oscillators, the weekly RSI has approached its bull market support band of 45-50 readings after the recent
decline. Historically, over the last two years the RSI approaching this intermediate support region has led to a
steady recovery on price front. This precedence also favours bullish argument for the stock from medium term
perspective

ICICI Securities Ltd. | Retail Equity Research

Exhibit 1: Sun Pharmaceuticals Weekly Bar Chart

Research Analyst

1200

The share price has approached key value area post the
stake sale by foreign co-promoter. The larger degree price
structure remains bullish and we believe that the current
decline offers a good entry opportunity for medium term
investors to position themselves to ride the next up move

61.8% @ 1090

Dharmesh Shah
dharmesh.shah@icicisecurities.com
Siddhant Khandekar
siddhant.khandekar@icicisecurities.com

860

Support @ 930
Rising trend line,
80% retracement &
21-week EMA

14-week RSI approached its bull market support zone of 45-50 readings with
the recent correction and suggests a reversal may be on the cards

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 2

Fundamental view

Stock Data
Amount
| 230492 crore
| 2489 crore
| 9589 crore
| 223392 crore
1201/572
| 241.1 crore
|1
5.7
22.5

Particular
Market Capitalisation
Debt (FY14E)
Cash & Cash Equivalents (FY14E)
EV (| Cr)
52 week H/L
Equity capital
Face value
MF Holding (%)
FII Holding (%)

Exhibit 1: Key metrics*

PE (x)
Target PE (x)*
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)

FY14
37.8
37.5
16.3
7.7
17.0
34.3

FY15E
36.6
36.3
14.5
6.8
26.7
31.8

FY16E
29.9
29.7
11.6
5.8
25.4
31.3

FY17E
26.2
26.0
9.7
5.2
23.1
28.8

* Base business value; we have not considered Ranbaxys

numbers

Exhibit 2: Financial highlights

(| Crore)
Net Sales
EBITDA
Adj. Profit
Adj. EPS (|)

FY14
FY15E
FY16E
FY17E
16080.4 18119.2 21224.6 23883.5
7195.6 7869.6 9280.2 10456.4
3204.4 5910.6 7221.1 8256.5
27.6
28.5
34.9
39.9

Established in 1983, Sun Pharma is the largest Indian pharmaceutical company both in terms of market
capitalisation and turnover (FY14). The company manufactures and markets a large basket of pharmaceutical
formulations in India, the US and several other markets across the world. However, the US and Indian formulations
are by far the core strengths and growth drivers for the company.In April 2014, Sun acquired Ranbaxy in a shares
swap deal. Under the terms of the agreed deal, Ranbaxy shareholders including Daiichi had received 0.8 Sun
Pharma share for each share of Ranbaxy share. The Deal Was closed on 6th April 2015.
Ranbaxys acquisition is likely to provide more therapeutic diversification to Suns portfolio and is likely to improve
its market share in key segments in the domestic space. Its domestic market share has substantially improved to
9.1% from 5.5% with a leadership in as many as 11 therapies. Ranbaxys strong hold in the fast growing emerging
markets (50% of Ranbaxy's sales) will complement Suns presence in this space. Regarding US, the company is
determined to address Ranbaxys cGMP issues as four out of five US centric facilities remain under USFDA
embargo. Suns will gain leadership position in the niche generic derma space also get entry in to branded and
OTC segments.
Sun is trading at 30-40% premium to BSEHC PE and its peers such as DRL, Lupin and Cipla on a fairly consistent
basis. This is on account of 1) Robust financials- a culmination of productive acquisitions, product launches at the
right time and at the same time keeping an eye on margins and return ratios 2) above average profitability margins
and 3) healthy return ratios despite higher cash component. The management has also guided for US$ 250 million
of synergy benefits from Ranbaxy the acquisition by FY18

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 3

NOTES:

It is recommended to enter in a staggered manner within the prescribed range provided in the report

Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report on
closing basis

The recommendations are valid for three to six months and in case we intend to carry forward the position,
it will be communicated through separate mail.

Trading Portfolio allocation

It is recommended to spread out the trading corpus in a proportionate manner between the various
technical research products

Please avoid allocating the entire trading corpus to a single stock or a single product segment

Within each product segment it is advisable to allocate equal amount to each recommendation

For example: The Daily Calls product carries 3 to 4 intraday recommendations. It is advisable to allocate
equal amount to each recommendation

ICICI Securities Ltd. | Retail Equity Research

Page 4

Recommended product wise trading portfolio allocation

Products

Allocations
Product wise
Max allocation
allocation
in 1 stock

Return Objective
Number of Calls

Frontline Stocks

Mid-cap stocks

Duration

Daily Calls

8%

2-3%

3-4 Stocks

0.50-1%

2-3%

Intraday

Short term Delivery

6%

3-5%

7-10 p.m

4-5%

7-10%

Opportunity based

Weekly Calls

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Weekly Technical

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Monthly Call

15%

5%

2-3 Stocks

7-10%

10-15%

1 Month

Monthly Technical

15%

2-4%

5-8 Stocks

7-10%

10-15%

1 Month

Techno Funda

15%

5-10%

1-2 Stocks

10% and above

15% and above

6 Months

Technical Breakout

15%

5-10%

1-2 Stocks

10% and above

15% and above

3-6 Months

Cash in Hand

10%

100%

ICICI Securities Ltd. | Retail Equity Research

Page 5

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd. | Retail Equity Research

Page 6

Disclaimer
ANALYST CERTIFICATION
We /I, Dharmesh Shah, Siddhant Khandekar Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about
the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:

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from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
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from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past
twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of
managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the
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interest at the time of publication of this report.
It is confirmed that Dharmesh Shah, Siddhant Khandekar Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of
the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies
mentioned in this report.

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Page 7