What should investors do with Sun Pharma post Q1 results: buy, sell or hold?


Sun Pharma Q1 results: Motilal Oswal is positive on the company due to – investments in the global Specialty portfolio improving overall profitability, robust pipeline of NDAs/ANDAs, and revival in the Branded Generics segment

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Sun Pharmaceutical Industries share price touched a 52-week high of Rs 799.60, rising 3 percent in the early trade on August 2 after the company reported its June quarter results.

The company on July 30 reported a net profit of Rs 1,444.1 crore in the quarter ended Q1FY22 against a loss of Rs 1,655.6 crore in the year-ago period.

The company’s revenue was up 28.2 percent at Rs 9,669.4 crore against Rs 7,582.5 crore, YoY.

Earnings before interest, tax, depreciation and amortization (EBITDA) were up 53.3 percent at Rs 2,821 crore versus Rs 1,840.6 crore and the margin was up at 29 percent against 24.3 percent, YoY.

Here is what brokerages have to say about the stock and the company post the June quarter earnings:

Citi | Rating: Buy | Target: Raised to Rs 910

Citi has maintained a buy rating on the company as it is a top pharma pick in India. The brokerage has raised its EPS estimates for the company for FY22/23/24 by 7-10%.

The specialty business is picking up and has potential to drive operating leverage, it reasoned. The generic business’ contribution is at historic Lows, while pipeline has potential to surprise positively.

CLSA | Rating: Buy | Target: Raised to Rs 960

CLSA has kept a buy rating on the stock as the specialty ramp-up is on track with PE rerating expected to follow. It is well-placed to boost specialty sales and achieve EBITDA breakeven in FY23.

JPMorgan | Rating: Overweight | Target: Rs 850

JPMorgan remained overweight as the growth is specialty is likely to continue and remained top pick in the sector.

The operating costs/R&D will increase to support the specialty effort.

Morgan Stanley | Rating: Overweight | Target: Raised to Rs 895

Broking house remained overweight as the positive stance driven by steady earnings growth. The valuation re-rating on positive operating leverage, specialty ramp-up and judicious capital allocation. Morgan Stanley seeing a strength in balancesheet as well.

Credit Suisse | Rating: Underperform | Target: Raised to Rs 640

The Q1 boosted by COVID and expect moderation in Ilumya ramp-up in H2. Also, see moderation in Ilumya ramp-up after UCB’s Bimekizumab & BMS’ Deucravacitinib launch.

Credit Suisse raises FY22/FY23/FY24 EPS estimates by 19%/11%/13%.

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Sharekhan | Rating: Buy | Target: RS 900

Sun Pharma’s key geographies, US and India, are witnessing improved traction. A strong growth in chronic therapies, including the sub chronics along with likely growth in acute therapies and product launches would fuel growth in the domestic formulations business. Growth in the US business would be driven by a pick-up in specialty business coupled with traction from new product launches.

Q1FY2022 results were ahead of estimates and considering this, we have revised upwards our estimates for FY22E and FY23E.

Improved growth prospects, healthy balance sheet position are the key positives, while resolution of all legal matters by subsidiary with Department of Justice antitrust and civil division in the US generic markets is positive and would remove the overhang on the stock.

Motilal Oswal | Rating: Buy | Target: Rs 900

Broking house raises FY22E/FY23E earnings estimate by 5%/6% to factor in: a) continued ramp up in Specialty sales in the US, with incremental opportunities from in licensed products, b) the benefit of an expanded field force in the DF segment, c) stable Taro business, and d) new product launches in US Generics.

It expect 16% earnings CAGR over FY21-23E, led by 15%/13% revenue growth in the US/DF.

It remain positive on the company due to: a) investments in the global Specialty portfolio improving overall profitability, b) a robust pipeline of NDAs/ANDAs, and c) revival in the Branded Generics segment.

At 09:23 hrs, Sun Pharmaceutical Industries was quoting at Rs 775.00, up Rs 1.00, or 0.13 percent on the BSE.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.