LIC has raised stake in this pharma major amid Covid 2.0; should you invest?

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Country’s biggest institutional investor Life Insurance Corporation of India (LIC) raised its stake in Sun Pharmaceutical amid the second wave of Covid-19 infections. The latest data showed that the insurance major now holds a 7.026% stake in the pharma major against 6.76% as of March 31.

Shares of the pharma major have increased by 13% to Rs 690.85 since the beginning of the ongoing financial year, while the benchmark BSE Sensex inched higher by 0.32% to 50,193.

With an 8.2% market share in India and leadership in 11 therapies, Sun Pharmaceutical Industries is the largest domestic pharma player with a presence across 100 countries. The company will announce its quarterly results on May 25.

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The company recently informed bourses that it has entered into a royalty-free, non-exclusive voluntary licensing agreement with Eli Lilly for expanding access to Lilly’s drug, baricitinib in India. Sun Pharma will manufacture and distribute the drug in India. Baricitinib is used in combination with remdesivir for the treatment of suspected or laboratory confirmed Covid-19 in hospitalised adults requiring supplemental oxygen, invasive mechanical ventilation, or extracorporeal membrane oxygenation.

The drug is approved by the Central Drugs Standard Control Organization (CDSCO) for restricted emergency use in India.

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Analysts are positive on Sun Pharmaceutical considering the present market scenario. Asian Markets Securities initiated coverage on the company with a price target of Rs 802, indicating an upside of nearly 15% from the current market price.

“While its US generics business has struggled over the past four years, the over $1 bn worth of investments in the specialty business is bearing fruit. We expect this business to grow from $429 mn in FY20 to more than $700 mn in FY23E. We believe Sun Pharma can deliver revenue CAGR of 10% and PAT CAGR of 7% over FY21-23E,” the brokerage said.

Investec also holds ‘Buy’ on the pharma major with a target at Rs 795. Sun Pharma posted another strong quarter in EU for Ilumya, up 103% YoY in Q1CY21. The firm expects the share of Ilumya in Germany to bounce back to 2020 levels.