Brokerages positive on Sun Pharma’s growth but investors unimpressed

Sun Pharma incurred an exceptional loss worth Rs 322.87 crore in Q1, which dragged its net profit lower. Excluding that, the company’s bottomline was well above analyst expectations

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Brokerages have maintained a robust growth outlook for drugmaker Sun Pharma following the release of its April-June earnings on August 3. Though the company’s net profit declined 2 percent on year to Rs 2,022.5 crore in the first quarter of the current financial year, the fall was mostly on account of an exceptional loss worth Rs 322.87 crore.

Adjusting for that,  the net profit not just rose nearly 14 percent on year to Rs 2,345.4 crore but also came in well above the Street’s estimate of Rs 2,119.4 crore.

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The Mumbai-based drugmaker also reported an 11 percent year-on-year increase in consolidated revenue at Rs 11,941 crore, topping expectations of Rs 11,606.5 crore. The EBITDA margin also rose to 27.9 percent in the quarter under review, up 230 basis points from the same period a year ago.

One basis point is one-hundredth of a percentage point.

Brokerage views

It is on the back of its better-than-expected performance that Sun Pharma has garnered positive growth forecast from brokerages across the Street.

Also Read | Sun Pharma Q1 results: Net profit down 1.9% to Rs 2,022.5 crore, lags estimate

Foreign brokerage Jefferies is bullish on Sun Pharma and attributed its earnings beat to higher-than-expected sales of generic blockbuster cancer drug Revlimid and lower research and development spends. Even though the firm is disappointed by the just 5 percent growth in the company’s India business, it expects improvement hereon.

The brokerage also said core earnings drivers remain intact for Sun Pharma, led by a ramp-up in specialty sales. It retained its “buy” call on the stock, with a price target of Rs 1,310.

Motilal Oswal Financial Services shares the optimism and remains positive on the drugmaker, backed by its robust innovative products franchise targeted for global markets and superior execution in branded generics markets. MOFSL, too, reiterated its “buy” call on the stock with a target price of Rs 1,310.

Nuvama Institutional Equities is more bullish on the drugmaker as it believes FY24 is unlikely to see pressure as some drugs from Halol are regaining market share, while the Mohali facility inches towards normalcy from the second half of the current fiscal.

The firm also expects Sun Pharma’s specialty portfolio to see Winlevi and Sezaby boost from FY25 onwards. In addition, expectations of an India recovery provide long-term comfort, the firm said. On that account, Nuvama raised its FY24E/25E core EPS for Sun Pharma by 2 percent/3 percent.

The firm also raised its price target for the stock by nearly 18 percent to Rs 1,320 while maintaining its “buy” call .

Despite the rosy growth picture painted by brokerages, investors didn’t seem to be much impressed by the earnings as shares of Sun Pharma were trading flat at Rs 1,141.50 on the NSE at 9.24 am.

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