After the company’s Q2 results on Wednesday exceeded street estimates in terms of both profit and revenue, Sun Pharma’s share price was trading higher on Thursday. On the BSE, Sun Pharma shares opened today at an intraday high of ₹1,130.80 a share. Technical analysts claim that pharmaceutical stocks are trending strongly and that Sun Pharma’s share price is rising during today’s trading session. Following the sell-off on Tuesday, prices have wisely recovered, and a hammer is visible on the weekly chart formation. While ₹1,180 can be anticipated shortly, ₹1,100 appears to be immediate support. Sun Pharma’s share price was up 0.95% at ₹1,126.75 per share at midnight IST.
For the July–September quarter, Sun Pharma reported a 5% YoY increase in its consolidated net profit to ₹2,375.5 crore, up from ₹2,262.22 crore in the same period the previous year. In the meantime, revenue increased by more than 11% YoY to ₹12,192 crore in the reviewed quarter compared to ₹10,952.3 crore in the same period last year.
In comparison to the same period last year, when earnings before interest, taxes, depreciation, and amortization (EBITDA) were ₹2,956.5 crore, they increased by nearly 8% to ₹3,179.30 crore during the current quarter. On the other hand, compared to the same period last year, the operating margin decreased by 91 basis points to 26.08% in the second quarter.
Brokers assert that their estimates were either met or almost surpassed by Sun Pharmaceutical Industries Ltd.’s Q2 results. As a result, brokers have adjusted their target price for Sun Pharma shares while keeping their “buy” rating for the stock. Moving forward, let’s examine the analysis and estimates for brokerages.
The Financial Services of Motilal Oswal
The brokerage reported that Sun Pharma’s 2QFY24 financial performance was typical. Its branded generics and specialty divisions both experienced rapid growth.
“With the introduction of new products, the extension of its market, and the better application of its current products, the company is well-positioned to strengthen its specialty franchise. It still performs better in other emerging markets as well as the Indian branded generics market (DF).
We keep valuing Sun Pharma at 26x12M forward earnings, which gets us to ₹1,310, which is our target price. BUY again, the brokerage advised.
Institutional Equities Nuvama
Sun Pharma’s Q2FY24, as reported by the brokerage, was in line with expectations. The US displayed lower gRevlimid, but India (+11% YoY), EM, and RoW outweighed the US. An EBITDA margin of 26.4% was in line with the remarkable 77.1% gross margin.
“Given: i) Steady Q2 even as opex rose sharply and gRevlimid dipped, we are more optimistic about SUNP’s potential. ii) As it increases its share and records double-digit growth, the long-awaited recovery in India appears to be taking shape. iii) Specialty appears to be moving along nicely; we should expect a boost from Winlevi + Sezaby starting in FY25, and deuruxolitinib approval possibly by FY26. iv) Halol products are beginning to reclaim market share, and Mohali will progressively return to normal. Retain ‘BUY’ with ₹1,330 target price (from ₹1,320) rolling over to Q2FY26, the brokerage stated.
Institutional Equities Kotak
Brokerage describes Sun Pharma’s Q2 results as a solid showing. Despite the negative effects of the Mohali consent decree, sequentially lower sales of gRevlimid, and higher R&D expenditures, Sun Pharma reported an excellent 2QFY24, according to the brokerage’s analysis. Sales in every category—aside from Taro surpassed or were in line with projections.
As a result of improved domestic productivity and higher specialty profitability, we anticipate Sun Pharma to report a healthy 190 bps EBITDA margin expansion over FY2023-26E, even after factoring in a further increase in R&D spending. As a result, we project an adjusted EPS CAGR of 13% for FY2022–2026.
With a revised FV of Rs1,280, we continue to maintain our ADD rating for Sun Pharma. The brokerage stated, “Sun Pharma continues to be our top choice in the pharmaceutical industry.”
