Sun Pharma nears 52-week high ahead of Q3 results; stock up 7% in a month

In the past one month, Sun Pharma outperformed market as shares surged 7 per cent, as compared to 2.5 per cent decline in the S&P BSE Sensex

Shares of Sun Pharmaceutical Industries gained 2.5 per cent to Rs 1,069.40 in Monday’s intra-day trade and quoted close its 52-week high level ahead of the December quarter results (Q3FY23) due Tuesday, January 31, 2023. In comparison, the S&P BSE Sensex was down 0.24 per cent at 59,185 at 11:17 am.

The stock of healthcare company had hit 52-week high of Rs 1,071 on November 2, 2022. In the past one month, it outperformed market as shares surged 7 per cent, as compared to 2.5 per cent decline in the S&P BSE Sensex. The stock had hit a record high of Rs 1,201 on April 7, 2015.

The board of directors of the company will also consider and approve declaration of interim dividend for the financial year 2022-23. The interim dividend, if declared, shall be paid to the equity shareholders of the company whose names appear on the Register of Members as on February 8, 2023 which is the record date fixed for this purpose, the company said.

Earlier, Sun Pharma had paid interim dividend of Rs 7 per share for the previous financial year 2021-22.

Analysts at ICICI Securities that the pharma universe is likely to witness decent growth during the quarter on a year-on-year (YoY) basis, led by continued traction in the domestic formulations business, which is poised to maintain a normalised growth trajectory of around 10 per cent YoY during the quarter.

Sun Pharma's US portfolio, too, is expected to deliver decent growth amid favourable currency movement and new launches.

Meanwhile, the company's subsidiary Taro Pharma reported better-than-expected earnings before interest tax and depreciation and amortization (EBITDA) margins in Q3FY22.

In Q3FY22, Taro's EBITDA margins improved 108 bps year-on-year (YoY) to 31.3 per cent, mainly due to better gross margins, while EBITDA de-grew 2.7 per cent YoY to $47 million. Net profit, too, de-grew 20 per cent YoY to $26.3 million. whereas revenues dropped 0.8 per cent YoY to $139 million. CLICK HERE FOR RELEASE

Despite the challenging market conditions, particularly in the US generic market, analysts said that Taro successfully defended its market share across each business. Therefore, Taro's performance has a substantial bearing on Sun's consolidated numbers albeit on a reducing scale.

"Sun Pharma’s revenues are likely to grow around 12 per cent YoY to Rs 10,994 crore, on the back of 10 per cent growth in domestic formulations to Rs 3,484 crore and around 13 per cent growth in US to Rs 3,369 crore. EBITDA is expected to post growth of around 14 per cent YoY to Rs 2,969 crore, while margins are likely to increase 60 bps to 27 per cent. Adjusted PAT, however, is likely to decline 6.3 per cent YoY to Rs 1,929 crore”, ICICI Securities said.

According to Motilal Oswal Financial Services (MOFSL), Sun Pharma added potential products to its specialty pipeline through the Concert Pharma Inc (CNCE) acquisition. The company is already tracking $200m per quarter sales from its specialty portfolio.

In addition to its own portfolio under development, Sun Pharma used the in-organic route to strengthen its new product offering in the dermatology space. Moreover, Sun Pharma continues to outperform in branded generics in India, as well as other emerging/ROW markets, believe analysts.

“We maintain our estimates given that the products are under development. We remain positive on Sun Pharma, considering its effort to strengthen the specialty franchise, branded generics led growth in India/emerging/ROW market, and its robust ANDA pipeline for the US market. We value Sun Pharma at 25x 12M forward earnings to arrive at a price target of Rs 1,200. Reiterate BUY,” the brokerage firm added.