Sun Pharma slips over 1% after June quarter numbers; Top brokerages' view

Sun Pharma Q1 Review: Shares of Sun Pharmaceutical Industries slipped over 1 per cent, a day after the pharma major reported a 2 per cent decline in its consolidated net profit at Rs 2,022 crore for the first quarter ended June 30, 2023. The drug major reported a net profit of Rs 2,061 crore in the April-June period a year ago. The company said its adjusted net profit (excluding the exceptional items) for the June quarter stood at Rs 2,345 crore, up 14 per cent over the same period last year.

Total income rose to Rs 12,145 crore in the first quarter as against Rs 10,764 crore in the year-ago period, Sun Pharma said in a regulatory filing.

"All our businesses continued to have growth this quarter and we are well positioned to meet our growth guidance for FY24," Sun Pharma Managing Director Dilip Shanghvi said. The US has led the revenue growth in the first quarter and global specialty business has continued to increase as a share of the revenues, he added. READ MORE

Top brokerages' views

Nirmal Bang Securities 

We remain positive on Sun Pharma due to the following catalysts: (i) The ramp-up of branded and speciality businesses in the US (recently acquired Deuroxolitinib would further strengthen the speciality pipeline) (ii) Continued growth in Indian business (iii) Potential inorganic opportunity given the strong BS, especially in Dermatology, Ophthalmology, and Oncology Specialties; (iv) Maintenance of a healthy EBITDA margin of ~27% despite higher R&D spends. We maintain BUY with a revised target price (TP) of Rs 1,315, valuing it at 28x June 2025 EPS of Rs 47.

InCred Equities 

The sharp rally in the stock price (10% in the last month vs. flat returns for Nifty) since our coverage initiation (link) has now rendered its valuation expensive at 26x. While we remain sanguine about the speciality portfolio and margins in the medium term, we await a better entry point. A successful buyout of Taro will provide access to its large US$1.3 billion surplus and is a key upside risk. The slowdown in the speciality portfolio is a key downside risk. The rally in stock price over the last two months led to a rich valuation, resulting in our rating downgrade from ADD to HOLD. The new target price is Rs 1,154.

Prabhudas Lilladher 

Over the last few years, Sun Pharma's dependency on US generics has reduced, and the company’s growth is more functional in its speciality, rest of the world (RoW), and domestic pharma business that has strong growth visibility. Furthermore, the acquisition of Concert Pharma, along with the progress of other pipelines, provides visibility for SUNP’s speciality pipeline beyond FY25. We maintain a ‘BUY’ rating at TP of Rs 1,265 (Rs 1,140 earlier) based on 27x FY25E earnings. Sun Pharma remains our top pick in the large-cap space.