Sun Pharma shares tumble 4% post-Q1 results; should you buy, sell or hold?

Sun Pharma shares tumble 4% on weak Q1 results; should you buy, sell or hold?

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26 Aug, 2025 12:21

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Shares of Sun Pharmaceutical Industries lost 4% on August 1, making it the worst Nifty 50 loser, after reporting June quarter earnings.

Brokerages gave a diverse range of calls for the pharma stock as it reported a higher adjusted profit on Thursday, aided by strong domestic sales.

The Mumbai-based firm's consolidated profit before tax and exceptional items rose 16.6% to Rs 3,991 crore in the quarter ended June 30.

The drugmaker reported a one-time charge of Rs 818 crore in the first quarter related to the impairment of certain assets and the settlement of a legal dispute.

Accounting for the charge, profit fell nearly 20% on-year.

At 11:35 am on August 1, Sun Pharma shares were trading 4% higher at Rs 1,638 apiece.

Brokerage Investec downgraded Sun Pharma shares by two notches to "sell", forecasting weaker earnings over the next three quarters, reported Reuters, reported Reuters.

Meanwhile, Choice Equity Broking gave an 'Add' rating to Sun Pharma with a target price of Rs 1,825.

"We expect Sun Pharma to continue delivering healthy growth driven by new launches, particularly from its innovative pipeline. While margins may see a temporary blip due to increased investments in promotional activities and R&D—especially for pipeline development in areas like GLP-1 agonists—these are likely to normalize by FY27E as high-margin launches scale up. The company also benefits from a strong US manufacturing base, which provides insulation against tariff-related risks, and management has indicated no plans for further expansion of this base.

"Factoring in the expected normalization of tax rates, we have revised our earnings estimates downward by 6.6%/5.3% for FY26E/FY27E. We value the stock at 30x (unchanged) the average of FY27E and FY28E EPS, arriving at a target price of INR 1,825 (unchanged), and maintain our ADD rating," it said.

Sun Pharma shares were also under pressure on August 1 because US President Donald Trump on Thursday wrote to 17 Big Pharma companies, including Eli Lilly, AstraZeneca, Novo Nordisk, Pfizer among others, demanding that these companies charge the US a similar rate compared to other countries for new medicines.

HSBC gave a 'Buy' call for Sun Pharma with a target price of Rs 1,850.

"Despite low spend in 1Q, Sun expects costs to rise as plan for incremental spend of $100 million in FY26 remains intact. Think strong growth in India segment and scale-up in innovative products sales will offset spend on new launches," said HSBC.

JM Financial maintained its 'Buy' rating on the stock and gave a target price of Rs 1,999.

"We project Sun Pharma to deliver a revenue CAGR of 11% over FY25–28, on an already large base, with gradual margin expansion as the contribution from branded and specialty products increases. The company is well-positioned to capitalize on its Specialty presence across three focus areas – oncology, ophthalmology, and dermatology – leveraging its existing field force, expanding portfolio, and strong balance sheet (cash reserves of $3.5 billion as of FY25) to pursue further acquisitions. At the CMP, the stock is trading at 29x/26x FY27/FY28 EPS, which we believe offers room for further re-rating as Specialty revenues scale up. We value the stock at Rs 1,999. Maintain BUY," said JM Financial.