Buy Sun Pharma, target Rs 650: Equity99

Answer: Nostrum (File imagDivis Laboratories share price performance in FY18: Up 75 percent | FY19: Up 56 percent | FY20: Up 17 percent.e)

Sumit Bilgaiyan

Following the VAI classification by USFDA for Halol unit last week, Sun Pharma has got EIR which indicates closure of FDA audit at Halol. It has been nearly four years since the September 2014 inspection when Halol first came under FDA scanner for non compliance resulting in zero approvals from Halol since then.

It has been a long wait for Sun to come back to full compliance and should result in quick approvals going ahead. Out of total 139 ANDA’s and 3 NDA’s pending, we believe several key filings for injectables, complex oral drugs and SPARC products are awaiting approval from Halol. Receipt of EIR is a positive development for Sun and paves way for gradual ramp up of Halol unit.

Faster approvals for Generics will help Sun to absorb overheads and support margins expansion in next couple of years, despite higher marketing spend on specialty launches.

It has made superb double bottom formation at Rs 435. After a smart move in short time, stock has strong hurdle near Rs 585-605 levels. Cross over will take it to Rs 650+ levels. Down side strong support exist at Rs 540-537 levels. We are recommending a buy on dips.