Sun Pharma gains 3%, JP Morgan overweight post massive fall

Moneycontrol Bureau

Shares of Sun Pharma gained 3 percent intraday on Thursday after the massive fall yesterday following Daiichi Sankyo’s exit. JP Morgan has an overweight rating on the stock with a target price of Rs 1030 per share. The stock has lost around 19 percent over the last two weeks but JP Morgan advises to use the weakness as a buying opportunity.

The brokerage believes base business of Sun Pharma can grow at 15 percent over the medium term, hence, sees significant upside from the integration of the Ranbaxy acquisition, manufacturing related synergies and the potential for accretive bolt-on M&A.  It is also optimistic that execution of the deal and Sun Pharma’s ability to improve Ranbaxy’s performance will be key medium-term drivers for the stock, with the upcoming Q4FY15 earnings report providing consolidated financials following deal closure.

“We may see synergies flowing through earlier than management’s expectation as integration efforts play out in FY16 and growth starts improving in 12-18 months. While the transaction could be earnings per share (EPS) dilutive by mid-single-digits in the first year after completion, we expect the trend to progressively improve, with low-teens EPS upside by FY18,” it says in a report.