Sun Pharma share price falls 2% after Q4 results fail to beat estimates; brokerages see up to 22% upside

Sun Pharma share price falls 2% after Q4 results fail to beat estimates; brokerages see up to 22% upside

Sun Pharmaceuticals share price fell 2% to hit an intraday low of Rs 856.7 on NSE on Tuesday after the drug maker reported a surprise net loss of Rs 2,227.38 crore for the quarter ended March 2022. Company’s revenue for the quarter rose 11% from a year ago to Rs 9,386.08 crore. The firm also reappointed Dilip Shanghvi as a managing director for a further term of five years and Pawan Goenka was appointed lead independent director. So far this year, Sun Pharma stock has outperformed benchmarks. Sun Pharma share price has risen 3.49% year-to-date as opposed to 6% fall in NSE Nifty 50. Analysts remain bullish on the stock and see up to 22% potential rally going forward on the back of scale-up of the Specialty portfolio, niche launches in the US generics segment.Stock talk: Should you buy, hold or sell Sun Pharma shares?Motilal Oswal: BuyTarget price: Rs 1,040; Upside: 17%

According to analysts at Motilal Oswal Financial Services, Sun pharma delivered a lower-than-expected 4QFY22 due to moderation in the RoW/EMs/API segment and higher OPEX. However, company’s Specialty portfolio continues to progress well, with its contribution to sales rising to 13% in FY22 from 7% in FY18. Analysts tweaked their FY23, FY24 EPS estimate by around 4% and 3% respectively factoring in a higher R&D spend on clinical trials, high OPEX-related to promotional activities and supply chain management; and weakness in API offtake to some extent.

JM Financial: BuyTarget price: Rs 1,090; Upside: 22%

Analysts at JM Financial Services noted that Sun’s 4QFY22 was driven by growing domestic and global specialty portfolio sales although the bottomline was impacted by one-offs. They believe that Sun’s learning curve has been steep in Big Pharma dominated specialty market and has successfully carved a niche for itself. “We believe that Sun is at an early stage earnings up-cycle due to the following- (1) A growing specialty portfolio; (2) Taro Recovery; (3) Robust R&D pipeline; (4) Unassailable domestic leadership; and (5) strengthening balance sheet with an improving margin profile,” they said in a report. The brokerage maintains buy call on the stock, and values Sun Pharma at 25x FY24 EPS of Rs 43.6 to derive a target price of Rs 1,090 per share.

Kotak Securities: AddFair Value: Rs 985

Analysts at Kotak Securities believe that Sub Pharma’s specialty business is yet to break even and as sales scale up further, the medium-term margin outlook stays healthy. “We cut FY2023/24E EPS by 4%/1% due to field force expansion, higher R&D and lower Alchemee profitability. FV lowered to Rs985 (at 25X FY2024 PE) from Rs1,000. Continued execution in specialty provides further re-rerating potential,” they said. Key risks to estimates include increased competitive intensity in specialty and higher increase in R&D spends.

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