Sun Pharma posts strong Q1FY22; should you buy?

Post stellar Q1 result most brokerages have re-rated stock and believe that it can touch Rs 900 apiece in the near term

  • Money9
  • Publish Date - August 2, 2021 / 11:41 AM IST
Sun Pharma posts strong Q1FY22; should you buy?
Sun Pharma made a new 52-week high of Rs 801.90 in morning trades

Shares of Sun Pharma made a new 52-week high of Rs 801.90 in morning trades on Monday after the company posted a better-than-expected net profit of ₹1,440 crore for the quarter ended June 30 against a loss of Rs 1,655.6 crore in the year-ago period.

The company’s revenue was up 28.2% at Rs 9,669.4 crore against Rs 7,582.5 crore, YoY (year-on-year). EBITDA (earnings before interest, tax, depreciation and amortisation) was up 53.3% at Rs 2,821 crore versus Rs 1,840.6 crore and the margin was up at 29% against 24.3%, YoY.

“We witnessed a strong Q1, driven by a combination of robust core business growth, low base and some sale of Covid products,” said Dilip Shanghvi, MD of Sun Pharma.

Analysts are also upbeat on the stock post strong Q1 performance. Here is what they have to say.

Edelweiss | Rating: Buy | Price target: Rs 950

Edelweiss has upgraded Sun Pharma to buy as Ilumya outperformance and Cequa’s strong recovery to help mitigate Absorica loss. Winlevi boosts to derma portfolio to monetize Absorica salesforce; gRevlimid launch in FY23, broad-based India growth, Winlevi uptick and specialty acceleration to translate into 30%+ margin in FY24. The brokerage firm has raised its FY23E EPS (earnings per share) by 27% due to core business improvement, gRevlimid and Winlevi.

Raise multiple to 28x on consolidated EPS to account for near-term specialty losses that yields revised SOTP-based (sum of the part) target price of Rs 950 per share.

Motilal Oswal | Rating: Buy | Price target: Rs 900

Steady traction in the Specialty portfolio, recovery in the core portfolio of Branded Generics, new launches in US Generics, and partial benefit of COVID-related products led to strong growth in 1QFY22 earnings.

Motilal Oswal remains positive on Sun Pharma on the back of its strategy of NCE-led brand building in developed markets, industry-leading market share in the branded generics market of DF, EM, and RoW, and its complex generics pipeline and improving operating leverage.

Morgan Stanley | Rating: Overweight | Price target: Rs 895

Morgan Stanley’s positive stance is driven by steady earnings growth. The global brokerage firm has rerated the stock on positive operating leverage, specialty ramp-up, a judicious capital allocation is making the balance sheet stronger.

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