Sun Pharmaceutical Industries, an international, integrated, speciality pharmaceutical company, said Monday the company's FY16 revenue could remain flat or show a decline over FY15 as the company expects to incur certain integration charges in order to generate long-term synergies from the Sun Pharma-Ranbaxy merger.
In addition to the revenue impact, the company expects that profits may also be adversely impacted due to certain expenses/charges arising out of integration as well as remedial actions.
'Our target for the synergy benefits from the Ranbaxy acquisition has increased by 15-20% as compared to our original target of USD 250 million by FY18,' the company said.
Commenting on the Sun Pharma warning on Ranbaxy merger cost, Sarabjit Kour Nangra, VP Research, Pharma, Angel Broking, said, ''After the FY2016 sales and profit guidance, we expect the company's financials to be impacted. However, post the consolidation, the company will be better placed to achieve higher than industry growth in subsequent years. The merger related wows were evident after the 4QFY2015, where the company's revenues and OPM were impacted on back of the same. On the OPM front, adjusting for the merger related costs, were at 26-27%. Thus, we believe that 29-30% margins from FY2017 should be not a problem, once it writes off all the merger costs in FY2016. We believe the company, given its leadership position and its ability to turnaround its acquisitions will continue to command premium in the market. Thus we recommend a price target of Rs 950.''
Sapna Jhawar, Research Analyst, Reliance Securities said, ''Sun Pharma management presented an update on various consolidation initiatives to drive future growth post its acquisition of Ranbaxy. Sun, which is currently in the process of streamlining the huge mismatch between the two companies has guided towards a flattish or negative top-line growth. This confirms our assumption that integration challenges between the two companies will continue to see more pain in form of one-offs that will follow in FY16E. We maintain NEUTRAL with a revised Fair Value of Rs 913.''
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