Sharekhan Research maintained purchase rating on Sun Pharmaceutical Industries with target price of Rs 1287. At current market price Rs 965, stock valued at 21.6x FY2008E and 18.1xFY2009E fully diluted earnings.

Result highlights:

In Q1FY2008 consolidated net sales of Sun Pharmaceuticals increase by 22.8% yoy to Rs. 6.275 billion. The strong growth was driven by an increase of 25.7% in domestic business and an 18% growth in its exports.

Its US subsidiary, Caraco Pharma, continued its growth momentum. Caraco Pharma sales increase by 43% yoy to $25 million with the net income rising by 70% to $8.5 million in Q1FY2008.

The operating profit margin (OPM) declined by 120 basis points to 34.2%, the operating profit rise by 18.6% to Rs 2.148 billion. In quarter, income grew by 121.1% to Rs 606 million from outstanding foreign currency convertible bonds (FCCBs).

Depreciation charge increase by 12% and tax incidence moved up to 3.9%, resulting in 29.1% rise in profit after tax (PAT) to Rs. 2.43 billion. Minority interest increased by 38.1% to Rs 158 million.

In Q1 FY2008 the consolidated net sales of Sun Pharma increase by 22.8% yoy to Rs 6.275 billion.