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CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access

08 September 2014

Asia Pacific/India

Equity Research

Major Pharmaceuticals

Sun Pharma(SUN.BO / SUNP IN)

INCREASE TARGET PRICE

Decoding Sun's low tax rate

■ Sun's low tax rate is sustainable. The FY14 Annual Report shows thatSun's tax rate is low for two reasons: (1) reorganisation of India businessinto a separate subsidiary, and (2) more than 40% of Sun's PBT is capturedin tax-exempted zones. After its partnership structure was brought underMAT, Sun transferred its India formulations into a 100% subsidiary andrevalued trademarks and brands. Amortisation of these intangibles is taxdeductible and thus the effective tax rate is reduced. We expect Sun's taxrate to remain <20% at least for five years. Disclosures show that EBITDA

margin for India business is high at >40%.

■ Demerger of Sun Pharma Global FZE could further reduce tax. Sundemerged and transferred a part of Global FZE (100% subsidiary) into thestandalone company. As a result, two key transactions were transferred: (1) aUS$550 mn payout on Protonix settlement, and (2) US$38.5 mn on a recentUS$440 mn deal. These transfers should reduce tax incidence at the standaloneentity and benefit consolidated accounts (as Global FZE is tax exempted).

■ Approval of Ranbaxy merger and use of cash are key catalysts. Sun hascash of US$2 bn (yield low at 5%), and generated FCF of US$920 mn in FY14.Use of cash at Taro and ex-Taro is a key catalyst. Sun is also seeking freshapprovals for (1) a debt limit of US$8.3 bn and (2) equity-linked instruments ofUS$2 bn. The approval for Ranbaxy merger is expected before FY15 end.

■

Increase target price to Rs950. We expect interest income to increase as40% of its total cash is lying in current accounts (non-interest bearing). Ourtarget price increases to Rs950 as we roll forward to Sep-16. We staypositive on Sun with visibility on growth increasing post Ranbaxy acquisition,Gleevec settlement, and Taro price increase. Key risk remains pending FDAinspection at Halol facility (~25% of profits).

Share price performance

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400

600

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1000

Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14

Pri ce (LHS) Rebased R el (RHS )

The price relative chart measures performance against the S&PBSE SENSEX IDX which closed at 27026.7 on 05/09/14

On 05/09/14 the spot exchange rate was Rs60.39/US$1

Performance over 1M 3M 12M Absolute (%) 13.0 42.7 62.3 — Relative (%) 6.3 37.0 22.1 —

Financial and valuation metrics

ear 3/14A 3/15E 3/16E 3/17ERevenue (Rs mn) 160,803.7 183,342.1 215,796.9 247,322.7EBITDA (Rs mn) 70,017.0 86,134.4 102,203.3 115,180.1EBIT (Rs mn) 65,924.7 81,014.0 96,813.9 109,570.6Net profit (Rs mn) 56,608.1 65,384.3 78,747.7 90,582.3EPS (CS adj.) (Rs) 27.33 31.57 38.02 43.73Change from previous EPS (%) n.a. 0 0Consensus EPS (Rs) n.a. 29.2 34.5 39.7

EPS growth (%) 43.4 15.5 20.4 15.0P/E (x) 31.4 27.2 22.6 19.6Dividend yield (%) 0.17 0.52 0.63 0.75EV/EBITDA (x) 24.3 19.1 15.5 13.1P/B (x) 9.6 7.4 5.8 4.7ROE (%) 33.8 30.8 28.9 26.4Net debt/equity (%) net cash net cash net cash net cashSource: Company data, Thomson Reuters, Credit Suisse estimates

Rating OUTPERFORM*Price (05 Sep 14, Rs) 857.80Target price (Rs) (from 900.00) 950.00¹Upside/downside (%) 10.7Mkt cap (Rs mn) 1,776,644 (US$ 29,420)Enterprise value (Rs mn) 1,644,221Number of shares (mn) 2,071.16Free float (%) 36.352-week price range 864.8 - 544.4 ADTO - 6M (US$ mn) 29.1*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

Anubhav Aggarwal

91 22 6777 [email protected]

Chunky Shah

91 22 6777 3872

[email protected]



08 September 2014

Sun Pharma

(SUN.BO / SUNP IN) 2

Focus tables and chartsFigure 1: Sun's tax rate is low, given (1) high amortisation on intangibles in India (2) ~40% of PBT is in tax-exempted zonesFY14 Sales PBT Tax Tax rate PBT margin

URL 17,776 9,452 3,520 37% 53%

DUSA 4,232 -52 -290 -1%

Taro 45,868 26,769 5014 19% 58%

India 39,469 3450.9 985 29% 9%

Global FZE 31,621 31,668 0 0% 100%

Total 138,966 71,288 9,229 13% 51%

Reported 160,044 72,501 7,889 11% 45%

Source: Company data, Credit Suisse research

Figure 2: About 40% of consolidated cash is in current accounts => interest income should increase(US$ mn) FY14 FY13 FY12 FY11

Total Cash 1,733 1,192 1,097 995

Ex-Taro 1,100 632 763 871

Taro 632 560 334 124

Non-interest bearing 666 264 70 89

Interest bearing 601 484 591 405Current Investments 334 240 319 423

Long term investments 132 204 116 78

Interest income Yield 5.9% 5.8% 8.8% 6.0%

Taro 1.1% 0.9% 0.7% 0.8%

Sun Ex-Taro 8.7% 8.7% 11.1% 6.6%


Figure 3: FCF at Sun ex-Taro has now scaled up to

US$600 mn (consolidated FCF >US$900 mn)

Figure 4: FY14 dividend was low due to higher proportion

of Taro profits

-

200

400

600

800

1,000

FY11 FY12 FY13 FY14

Consol FCF- before acquisi tions Taro FCF Sun ex-Taro FCF

USD mnEx-Taro FCF close to $600mn

0%

5%

10%

15%20%

25%

30%

FY10 FY11 FY12 FY13 FY14

Dividend as % Consol Prof it D ividend as % ex-Taro Prof it

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse estimates

Figure 5: FY14 PBT margins for Sun increased across subsidiariesFY13 FY14

US sales (US$ mn) 1,132 1,620

Taro (US) 588 669

URL 33 294

DUSA 18 70

Sun (US) 493 586

PBT Margin FY13 FY14

Consol Sun 43% 47%*

Taro 50% 58%

URL 27% 53%

DUSA -9% -1%

Remaining (India + US+Row+API) 41% 42%*

* Adj for US$38.5 mn one-off charge. Source: Company data, Credit Suisse research



08 September 2014

Sun Pharma


Decoding Sun Pharma's low tax rateSun Pharma's FY14 Annual Report does help in decoding why Sun's tax rate has been

low so far (<15%), and Sun Pharma's tax rate should continue to be low for the next five

years at least (we expect Sun's tax rate to remain less than 20% for the next five years). In

our view, Sun's tax rate is low for two reasons: (1) the recent reorganisation of India

business into a separate subsidiary has resulted in tax savings (as discussed below), and

(2) more than 40% of Sun's PBT is captured in tax-exempted zones. Taro, URL and DUSA

carry out their own manufacturing, and the tax rate at these subsidiaries is higher than the

corporate average.

Figure 6: Sun's tax rate is low, given (1) low PBT margins in India (2) ~40% of PBT is in

tax exempted zones FY14 Sales PBT Tax Tax rate PBT margin

URL 17,776 9,452 3,520 37% 53%

DUSA 4,232 -52 -290 -1%

Taro 45,868 26,769 5014 19% 58%

India 39,469 3450.9 985 29% 9%

Global FZE 31,621 31,668 0 0% 100%

Total 138,966 71,288 9,229 13% 51%

Reported 160,044 72,501 7,889 11% 45%


1) India formulations: Reorganisation has resulted in lower taxes

Sun Pharma spun-off its India formulations business from the standalone entity to 'Sun

Pharma Laboratories' with effect from 31 March 2012. In addition, Sun Pharma also

amalgamated a couple of other subsidiaries—Sun Pharma Medication Private Ltd

(SPMPL) and Sun Pharma Drugs Private Ltd (SPDPL)—with effect from Sep-12.

As part of the spin-off, Sun Pharma transferred assets having book value of Rs3 bn to Sun

Pharma Laboratories. However, in Sun Pharma Laboratories' financials, these assets

were accounted at a fair value of Rs183 bn (under the heading Intangibles through

Business Combination). As per the accounting policies of Sun Pharma Laboratories, the

intangible assets will be amortised on a straight-line basis over the life of the assets (12

years). In our view, amortisation expense is tax deductible and results in lowering

taxes for Sun Pharma Laboratories. Through these steps, the effective tax rate on the

highly profitable Indian Pharma business is less than 15%.

For FY13, amortisation expenses amounted to Rs15 bn. The amortisation expenses will

help maintain tax rate on profits (before amortisation) below 20% for the next five years

(as sales and EBITDA at the domestic entity should increase from the current level of 18%

CAGR, while the amortisation expense will likely remain constant).

Figure 7: Tax paid at India formulation business is low due to amortisation expenses(Rs mn) FY13 FY14

Turnover 23,467 39,469

PBT - 1,356 3,451PBT margins -6% 9%

Tax 832 985

Tax rate nm 29%


We highlight that profitability ex-amortisation at the India formulation business is not low.

EBITDA margin for FY13 was 42% (Figure 8).



08 September 2014

Sun Pharma


Figure 8: EBITDA margin for India formulation healthy at 42%Abridged P&L for Sun Pharma Labs FY13

Revenues 23,467

Material cost 7,175

Gross Profits 16,292

Gross Margins 69%

Employee expenses 1,916

Other expenses 4,502EBITDA 9,874

EBITDA margins 42%

Other income 4,114

Dep 104

Amortisation 15,240

PBT -1,356

Tax 832

PAT -2,188


2) Sun Pharma Global FZE: Key tax-exempted zone for Sun Pharma

Sun's low tax rate of 10% in FY14 was also helped by higher proportion of PBT captured

at the tax-exempted UAE subsidiary, Sun Pharma Global FZE. Historically, PBT margins

at this subsidiary were about 40-50% but FY14 PBT margin was very high at almost

100%. It is possible that this could have been driven by one-off factors in FY14 but Sun

Pharma Global FZE stays as one of the key reasons for the lower tax at Sun Pharma.

We want to further highlight that Sun Pharma has incorporated a new subsidiary in

Switzerland, which should help diversify its profit stream from tax-exempted zones.

Figure 9: FY14 PBT margin in the UAE subsidiary was

almost 100%

Figure 10: >40% of FY14 PBT was driven by the UAE

subsidiary

0%

20%

40%

60%

80%

100%

120%

FY11 FY12 FY13 FY14

PBT margin at tax exempted zones

0%

5%

10%

15%

20%

25%

30%

35%40%

45%

50%

FY11 FY12 FY13 FY14

% of PBT from tax exempted zones

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research



08 September 2014

Sun Pharma


Demerger of Sun Pharma Global FZE could furtherreduce tax

Sun Pharma demerged and transferred a "specific undertaking" of Sun Pharma Global

FZE (100% subsidiary) into a standalone company (Sun Pharma Industries) with effect

from May-13. This transaction was approved by the court in Aug-14. As a result, two key

transactions have been transferred from Sun Pharma Global FZE to the standalone entity:

(1) a penalty of US$550 mn paid on Protonix settlement, and (2) a expense ofUS$38.5 mn corresponding to a recent deal of US$400 mn that Sun Pharma Global FZE

entered into with a third party. In our view, this transfer should help reduce tax incidence at

the standalone entity and help further reduce the consolidated tax rate, as incurring these

expenses at Sun Pharma Global FZE will not be productive as it is a tax-exempted zone.

Balance sheet entries to give effect to this transfer is as follows:

Figure 11: Amounts transferred to Sun standalone as part of the demerger of FZE Assets Liabilities

Fixed Assets 96 Capital reserve 28,110

Investments in Sun Pharma Global Inc 30,130 Long term provision 23,162

Other current assets 24,002 Short term provision 3,150

Source: Company data, Credit Suisse estimates

Out of a US$438.5 mn deal with the third party, only US$50 mn was included in short-term

provisions and the balance in long-term provisions. This shows that supply of goods

against a US$438.5 mn deal in FY15 will just be US$50 mn.



08 September 2014

Sun Pharma


Doxycycline for Sun is ~US$150 mnSun's disclosure shows that URL sales in FY14 were US$294 mn with a PBT margin of

53%. Assuming the PBT margin on Doxycycline was about 95%, this shows that

Doxcycline sales for URL in FY14 should be about US$140-150 mn, instead of US$210

mn sales shown in the IMS disclosure. Quantifying Doxycycline is important for Sun as

Hikma in its recent guidance has guided for a sharp decline in Doxycycline sales in 2H

CY14 (where Hikma expects more players to enter the market).

With PBT margin disclosure available for URL and DUSA, margins for ex-Taro, Ex-URL

and DUSA increased in FY14 to 42% vs 41% in FY13 (this is adjusted for a US$38.5 mn

one-off charge taken on a US$438.5 mn deal in FY14).

Figure 12: FY14 PBT margins for Sun increased across subsidiariesFY13 FY14

US sales (US$ mn) 1,132 1,620

Taro (US) 588 669

URL 33 294

DUSA 18 70

Sun (US) 493 586

PBT margin FY13 FY14

Consol Sun 43% 47%*

Taro 50% 58%

URL 27% 53%

DUSA -9% -1%

Remaining (India + US+Row+API) 41% 42%*

* Adj for $38.5mn one-off charge. Source: Company data, Credit Suisse research

Strong FCF of US$920 mn in FY14 with ex-Taro FCFof US$585 mn helped by Doxycycline cash flows

Ex-Taro FCFs improved to US$586 mn in FY14 (FY13: US$332 mn before acquisitions).

This was helped by full-year contribution of Doxycycline and continued upside of Doxil.

Figure 13: FCF increase at Sun ex-Taro helped by Doxycycline contribution FY11 FY12 FY13 FY14

Consol FCF—before acquisitions 280 318 570 922

Taro FCF

CFO 98 214 249 358

Organic capex 6 6 10 21

Taro FCF 92 208 238 336

Sun Ex-Taro

CFO 280 253 477 714

Organic Capex 92 143 145 129

Acquisition capex 103 57 302 -

Sun FCF before acquisitions 188 110 332 586




08 September 2014

Sun Pharma


Interest income has upside, as 40%of cash is in current accountsSun had cash of US$1.7 bn in FY14, of which 35% was at Taro—where the yield is low at

just 1% and is a source of upside when Taro uses the cash for an acquisition. The Annual

Report highlights the split of cash, and it is interesting to note that out of an incremental

US$540 mn cash added to the balance sheet in FY14, US$400 mn was addition to current

accounts where the yield was zero. Therefore, as this cash is invested either as

investments or in deposits, interest income at Sun ex-Taro should increase from the

current level.

Figure 14: About 40% of consolidated cash is in current accounts and depresses interest yield

US $mn FY14 FY13 FY12 FY11

Total cash 1,733 1,192 1,097 995

Ex-Taro 1,100 632 763 871

Taro 632 560 334 124

Non-interest bearing 666 264 70 89

Interest bearing 601 484 591 405

Current Investments 334 240 319 423

Long term investments 132 204 116 78

Non-interest bearing 38% 22% 6% 9%

Interest bearing 35% 41% 54% 41%

Current Investments 19% 20% 29% 42%

Long term investments 8% 17% 11% 8%

Interest income Yield 5.9% 5.8% 8.8% 6.0%

Taro 1.1% 0.9% 0.7% 0.8%

Sun Ex-Taro 8.7% 8.7% 11.1% 6.6%


Other income impacted by MTM loss of US$32 mn

Annual Report disclosures show that FY14 other income (as reported in quarterly

disclosure) was impacted by an MTM loss of US$32 mn in FY14 vs a US$13 mn loss in

FY13. If the currency remains stable at 60, this loss of US$32 mn could add about Rs0.8

of EPS of or boost FY15 profit by about 3%.

FY14 dividend payout historically low due to nodividends at Taro

Sun's dividend payout last year was one of the lowest so far from a perspective of

percentage of consolidated profits (just 10% payout). However, adjusted for Taro's profits

(where dividend payout is nil), Sun paid out about 18% of its consolidated profit (ex-Taro)as dividends.



08 September 2014

Sun Pharma


Figure 15: Dividend declined in FY14… Figure 16: …due to higher proportion of profit from Taro

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0.5

1.0

1.5

2.0

2.5

3.0


Dividend (Rs/share)

0%

5%

10%

15%

20%

25%

30%


Dividend as % Cosol Profi t D iv idend as % ex-Taro Profi t

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse estimates

Special resolution for US$8.3 bn debt and US$2 bnequity

Under the new Companies Act, Sun Pharma is seeking fresh approvals for enabling

resolution to raise (1) a debt of Rs500 bn (US$8.3 bn), and (2) equity-linked instruments of

Rs120 bn (or US$2 bn). We continue to highlight that given the M&A wave in the global

Pharma market, the number of potential targets for Sun Pharma is reducing in the

speciality pharma space and we expect Sun Pharma to make another acquisition even

before the full synergies from the Ranbaxy acquisition is realised.



08 September 2014

Sun Pharma


Companies Mentioned (Price as of 05-Sep-2014)

Hikma Pharmaceuticals Plc (HIK.L, 1689.0p) Ranbaxy Laboratories Limited (RANB.BO, Rs652.0) Sun Pharmaceuticals Industries Limited (SUN.BO, Rs857.8, OUTPERFORM, TP Rs950.0) Taro Pharmaceutical Industries Ltd (TARO.N, $155.49, OUTPERFORM, TP $150.0)

Disclosure Appendix

Important Global Disclosures

I, Anubhav Aggarwal, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies andsecurities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed inthis report.

3-Year Price and Rating History for Ranbaxy Laboratories Limited (RANB.BO)

RANB.BO Closing Price Target Price

Date (Rs) (Rs) Rating

26-Jan-12 475.20 410.00 U

23-Feb-12 439.95 390.00

09-Aug-12 501.80 420.00

12-Dec-12 501.95 457.00

19-Feb-13 421.30 435.00 N25-Feb-13 433.15 420.00

07-Aug-13 281.90 310.00

29-Oct-13 385.65 345.00

05-Feb-14 340.05 365.00

* Asterisk signifies initiation or assumption of coverage. UNDERPERFORM

NEUTRAL

3-Year Price and Rating History for Sun Pharmaceuticals Industries Limited (SUN.BO)

SUN.BO Closing Price Target Price

Date (Rs) (Rs) Rating

19-Oct-11 241.00 267.50 O

21-Nov-11 249.18 288.00

04-Jan-12 250.68 297.50

29-Mar-12 285.40 312.50

31-May-12 283.75 325.00

12-Aug-12 337.80 370.00

13-Sep-12 338.42 387.50

12-Dec-12 362.35 410.00

05-Feb-13 373.65 420.00

21-Feb-13 397.85 450.00

28-May-13 497.78 560.00

12-Jun-13 490.50 545.00

09-Aug-13 507.10 585.00

10-Dec-13 587.25 685.00

14-Feb-14 608.95 715.00

27-Jun-14 660.65 760.00

13-Aug-14 800.25 900.00

* Asterisk signifies initiation or assumption of coverage.

OUTPERFORM



08 September 2014

Sun Pharma


3-Year Price and Rating History for Taro Pharmaceutical Industries Ltd (TARO.N)

TARO.N Closing Price Target Price

Date (US$) (US$) Rating

25-Sep-13 69.66 85.00 O *

26-Jun-14 118.28 150.00

* Asterisk signifies initiation or assumption of coverage.

OUTPERFORM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse'stotal revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which

consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, andUnderperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s totalreturn relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing themost attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non -Japan Asia stocks, ratingsare based on a stock’s total return relative to the average total return of the relevant country or reg ional benchmark; prior to 2nd October 2012 U.S. and Canadianratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential withinan analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% anda 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total returnrelative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain othercircumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/orvaluation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An an alyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 44% (54% banking clients)Neutral/Hold* 40% (51% banking clients)Underperform/Sell* 13% (44% banking clients)Restricted 3%*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closelycorrespond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer todefinitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.



08 September 2014

Sun Pharma


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Price Target: (12 months) for Sun Pharmaceuticals Industries Limited (SUN.BO)

Method: Our target price for Sun Pharmaceuticals Industries Limited is Rs950 as Rs900 valued at 22x our earnings estimate for 12months endingSep 2016, and Rs50 from Ranbaxy integration synegies. We value Sun Pharma at 10% premium to the sector average, due to superiorreturns and a strong balance sheet of Sun Pharma. Sun Pharma has traded at a premium of 10-15% to large cap pharma peers over thelast five years.

Risk: Downside risks to our Rs950 target price for Sun Pharmaceuticals include the following: (1) Price increase taken at Taro not sustaining;(2) competition becoming more intense in the chronic segment in India; and (3) expensive acquisition with the use of cash.

Price Target: (12 months) for Taro Pharmaceutical Industries Ltd (TARO.N)

Method: Our target price of USD150 is based on DCF methodology assuming 10% WACC, 9% sales CAGR for the next 4 years and 1% terminalgrowth. Our target price implies one year EV/EBITDA multiple of 9x.

Risk: Risks to our target price of USD 150 are 1) Price erosion on top products 2) Delay in new approvals. Our estimates assume market shareloss on existing products to be offset by sales from new launches. Timing mismatch between the two is a risk to our estimate 3) Approvals/ sales impacted by FDA action. Taro currently supplies to the US market through two facilities loacted in Israel and Canada. Ifany of the two facilities deviate from GMP requirements, supply or new approvals could be impacted.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in thetarget price method and risk sections.

See the Companies Mentioned section for full company names

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (SUN.BO) within the next 3months.

As of the date of this report, Credit Suisse makes a market in the following subject companies (TARO.N).

Important Regional DisclosuresSingapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (SUN.BO, TARO.N,RANB.BO) within the past 12 months

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Credit Suisse Securities (India) Private Limited ................................................................................................ Anubhav Aggarwal ; Chunky Shah



08 September 2014

Sun Pharma


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08 September 2014

Sun Pharma

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