Sun Pharma hits three-month low post Q2 results; drops 10% in three days

The stock was down 5 per cent at Rs 533, trading at its lowest level since July 17, 2018, on BSE.

Shares of Sun Pharmaceutical Industries hit  three-month low of Rs 533, down 5 per cent on  BSE, after the company posted a consolidated loss of Rs 2.18 billion for the quarter-ended September (Q2FY19), on account of a one-time loss of Rs 12.14 billion on Modafinil antitrust litigation.

The stock was trading at its lowest level since July 17, 2018. In past three trading sessions, it has fallen 10 per cent from Rs 596, as compared to a marginal 0.15 per cent rise in the S&P BSE Sensex.

Excluding the exceptional expenses, the net profit stood at Rs 9.96 billion. It had posted a profit of Rs 9.12 billion for the year-ago period, it said in a BSE filing.

The drug firm also missed estimates on the revenue front, posting revenue of Rs 69.37 billion for the quarter — a moderate growth of 4.3 per cent from the year-ago period. Analysts had expected a double-digit revenue growth for the quarter. EBITDA margin stood at 21 per cent in Q2FY19 against 20 per cent in Q2FY18.

The brokerages have mixed view on the stock post Q2 results.

Motilal Oswal Securities remain positive on Sun Pharma. It has maintained ‘buy’ rating on the stock and 12-month target price of Rs 760 per share, considering likely ramp-up of specialty products, increased approvals from Halol and good potential in the domestic formulation.

“The management reaffirmed the launch of specialty products CEQUA and XELPROS in the US in FY19 and the ILUMYA launch in Europe by the end of Q3FY19. The EBITDA margin of 22.1 per cent was largely in line with the Street’s expectations. While specialty product launches are expected to put pressure on margin, significant costs related to specialty are already in the Q2 base, suggesting that margin pressure will not be severe,” analysts at SBICAP Securities said in result preview with ‘buy’ rating on the stock.

Management maintains low double-digit growth in revenues with 8‐9 per cent of R&D expenditures (mainly for specialty portfolio) in FY19E. It also cautioned of significant cost push (promotion, marketing and employee) of launching three branded specialty products in FY19E.

“Expecting the continuation of headwinds in US generics, Sun Pharma guided for the launch of generics with limited competition in FY19E. The Sun Pharma valuation remains challenging and one of the highest among its peers as it trades at PE of 32x and 29x of FY19E and FY20E, respectively. With its H1FY19 core financial performance is in line with our estimates of FY19E. We maintain ‘Reduce’ on the stock with the target price of Rs 447,” analysts at Prabhudas Lilladher said in result update.