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Most global brokerage firms have maintained buy recommendation on Sun Pharma after India’s largest drugmaker said its net profit jumped 286.1 percent to Rs 1,241.1 crore in the third quarter ended December 2018.
The reported numbers were higher than analyst estimates by a wide margin helped by a strong recovery of US generics business. The company posted a net profit of Rs 321.5 crore during the previous year’s period.
Reacting to the results, Sun Pharma jumped 3 percent in morning trade on Wednesday.
Global brokerage firms have a target price in the range of Rs 535-560 on Sun Pharma which translates into an upside of 22-28 percent return in the next 12 months.
Revenues from operations gained 17 percent to Rs 7,933.25 crore compared to a year ago's Rs 6,782.42 crore. The EBITDA margin of the company stood at 27.8 percent.
CLSA which marinated its buy rating on Sun Pharma post Q3 results recommends a target price of Rs 560. The December quarter results were good even after adjustments.
The specialty pipeline execution will be the key focus area for FY20. The US sales grew by 8 percent on a QoQ basis to USD 370 million, led by market-share gains in generic products.
The response to novel psoriasis drug Ilumya has been good, and CEQUA launch has been delayed a bit to Q1FY20, highlighted the CLSA report.
The execution will be the key in FY20. The valuations are fairly attractive and going forward specialty portfolio ramp-up could drive a rerating, added the report.
Sales in the US were $362 million for the quarter, a growth of 10 percent over the same period last year and accounted for 34 percent of total sales.
Sun Pharma in the US has 441 ANDAs approved, while filings for 564 ANDAs await US FDA nod, including 15 tentative approvals. For the quarter, 5 ANDAs were filed and 10 approvals were received.
Here’s what other global brokerage firms are recommending:
Jefferies: Buy| Target: Rs 535
Jefferies maintained its buy rating on Sun Pharma post December quarter results with a target price of Rs 535. The pharma major reported better-than-expected Q3 results, led by a margin beat.
The US revenue was below our expectation but EM/ROW surprised positively, said the note. The CQUEA launch has been delayed to Q1FY20, and the Ilumya is tracking well. The corporate governance concerns could remain a near-term overhang.
From the investors’ perspective, the risk-to-reward ratio is favorable as the underlying business is improving.
Citi: Buy| Target: Rs 540
Citigroup maintained its buy rating on Sun Pharma post Q3 results with a target price of Rs 540. The management commentary was optimistic, and hinted at better disclosures going forward.
The lingering concerns on generics business are fading, and going forward specialty progress would be key to stock performance.
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