Sun Pharma hits over 5-yr high on hopes of robust revenue growth in Q2

Motilal Oswal Securities remains positive on Sun Pharma due to investments in the global Specialty portfolio improving overall profitability

Shares of Sun Pharmaceutical Industries hit an over five year high of Rs 846.80, up 2 per cent on the BSE in Wednesday;s intra-day trade, on expectation of strong revenue growth supported by healthy specialty as well as healthy domestic performance. The stock of the drug company was trading at its highest level since August 2016.

The board of directors of Sun Pharma is scheduled to meet on November 02, 2021 to consider and approve unaudited financial results of the company for the quarter and half year ended September 30, 2021.

"In Q2FY22, Sun Pharma is likely to achieve 12 per cent year on year (YoY) sales growth. Margins to contract 130bp despite of incremental contribution from specialty segment primarily due to reversal in the travel and promotional cost savings witnessed during last year resulting in modest 6 per cent growth in EBITDA," analysts at PhillipCapital said in a results preview report.

Motilal Oswal Securities, meanwhile, maintains a 'buy' rating on Sun Pharma with a target price of Rs 960 per share. "We remain positive on Sun Pharma due to investments in the global Specialty portfolio improving overall profitability, a robust pipeline of NDAs/ANDAs, and revival in the Branded Generics segment in domestic formulation (DF), and incremental contribution from an expanded field force," it said.

"After having toughed out for more than three years in the US, its flagship product Ilumya is continuously ramping-up sales, with Cequa also showing good traction. This is slightly offset by generic competition in Absorica and difficulty in shifting prescriptions to Absorica LD. While Ilumya and Winlevi contribution can drive growth in Specialty sales over the medium term, Sun Pharma has four products under clinical trials. The risk to Cequa sales persist, with scope for genericization of peer product Restasis," the brokerage firm said in a stock update.

According to ICICI Securities, Sun Pharma’s revenues are likely to grow 10.9 per cent YoY to Rs 9,482 crore, mainly due to 15.9 per cent YoY growth in domestic formulations to Rs 2,934 crore and 14.7 per cent YoY growth in the US (Ex Taro) to Rs 1,639 crore.

"Amid lower base, Taro's sales are expected to grow around 5 per cent YoY to US$150 million. EBITDA margins are expected to decline 190 bps to around 24 per cent. Adjusted net profit is expected to decline 18 per cent YoY to Rs 1,486 crore," the brokerage firm said in a healthcare sector earnings preview.