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What should investors do with Sun Pharma post Q4 earnings: buy, sell or hold?

Here is what brokerages have to say about the stock and the company after the March quarter earnings announcement:

May 28, 2021 / 09:44 AM IST
 
 
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Sun Pharmaceutical Industries share price fell 3 percent in early trade on May 28, a day after the company posted its March quarter earnings.

The drugmaker on Thursday reported an over two-fold jump in consolidated net profit to Rs 894.15 crore for the quarter ended March 2021, mainly on account of robust performance in the Indian market.

The company had posted a net profit of Rs 399.84 crore in the corresponding period of the previous fiscal, Sun Pharma said in a regulatory filing.

Consolidated total revenue from operations stood at Rs 8,522.98 crore for the quarter under consideration. It was Rs 8,184.94 crore in the same period a year ago, it added.

Also Read - Sun Pharma Q4 net profit zooms over two-fold to Rs 894.15 crore

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Here is what brokerages have to say about the stock and the company after the March quarter earnings announcement:

Credit Suisse | Rating: Underperform | Target: Rs 525

The specialty sales missed the estimates in Q4. The sales growth guidance for FY22 was not provided in concall.

CLSA | Rating: Buy | Target: Raised to Rs 850

India sales grew 13% YoY, but global specialty sales dipped 6% QoQ. The key specialty products are gaining ground. Significant operating leverage will accrue over the coming years. Success in specialty products should drive a PE rerating. CLSA raises FY22-23 EPS estimate by 1-3%.

Morgan Stanley | Rating: Overweight | Target: Rs 705

The company expects all-around sales growth in FY22. The positive operating leverage & growth rebound should help margin. Specialty ramp-up, strong balance sheet & Halol remediation are the key drivers.

Motilal Oswal | Rating: | Target: Rs 830

We raise our earnings to estimate by 9%/8% for FY22E/FY23E, factoring in a) heightened demand due to COVID, steady growth in the Chronic segment, and recovery in the Sub-Chronic category in the DF segment; b) the benefit of an expanded field force in the DF segment; and c) improving traction in the global Specialty portfolio.

Accordingly, we raise our target price to Rs 830 on a 25x 12M forward earnings basis. We remain positive on stock on its superior execution in the global Specialty portfolio / Branded Generics and a robust ANDA pipeline. Maintain Buy.

Sharekhan | Rating: Buy | Target: Rs 810

Q4FY21 was a strong quarter for Sun Pharma, however the management expects COVID-led uncertainties to stay and hence has refrained from giving growth guidance. However it stays focused on growing the performance across segments as the long term growth levers are intact.

Improved growth prospects over the longer term, healthy balance sheet position would be key positives. Therefore, we retain the buy recommendation on the stock with a revised price target of Rs 810.

Dolat Capital | Rating: Buy | Target: Rs 786

We expect its specialty portfolio to achieve profitability in FY23E with gross margin expansion and the end of negative operating leverage post breakeven in specialty assets expected to aid EBITDA margin expansion of ~390 bps over FY20-23.

Sun’s valuation, at 22.6x FY23E earnings, does not justify its visibility for specialty-business-driven growth and steady outlook on its India and ROW formulations, in our view.

Risk reward is favorable given the strong FCF generation over FY20-23E and OCF/EBITDA at ~77%. Our SOTP based target price of Rs 786 values Sun at 25x FY23E.

HDFC Securities | Rating: Add | Target: RS 740

Sun’s India business grew by 13% YoY, outperforming the IPM by 744bps in the quarter. It maintained its leadership position with 8.3% market share

Our target price is revised upwards to Rs 740/sh, based on 24x FY23e EPS (vs. 23x earlier). Risks included delay in resolution of Halol, higher price erosion in the US, and slower ramp-up in specialty portfolio.

At 09:23 hrs, Sun Pharmaceutical Industries was quoting at Rs 679.60, down Rs 20.15, or 2.88 percent on the BSE.

The share touched a 52-week high of Rs 721.90 and a 52-week low of Rs 443.10 on 11 May, 2021 and 27 May, 2020, respectively.

Currently, it is trading 5.86 percent below its 52-week high and 53.37 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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first published: May 28, 2021 09:40 am
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