Sun Pharma surges 4%, hits 52-week high; stock rallies 76% from March-low

For the quarter ended June 2020, Sun Pharma reported a surprise loss due to one-time charges.

Shares of Sun Pharmaceutical Industries surged around 4 per cent to hit a fresh 52-week high of Rs 554.90 on the BSE on Friday. With today's rally, the stock has climbed 76 per cent from its 52-week low of Rs 315.20, hit on March 23, 2020. 

At 01: 48 pm, the stock was trading 3.5 per cent higher at Rs 551.55. In comparison, the S&P BSE Sensex was trading nearly 1 per cent higher at 39,465 levels. 

For the quarter ended June 2020, Sun Pharma registered a surprise loss due to one-time charges. The company’s US business posted a 33.5 per cent decline during the quarter, while India sales were up 3.2 per cent on a year-on-year (YoY) basis. Consolidated sales from operations at Rs 7,467 crore, a decline of about 9.6 per cent over the same quarter last year.

The company had announced its June quarter result on July 31.  

Sun Pharma had posted a loss before tax of Rs 2,183.9 crore, as compared to a profit before tax of Rs 1,647.4 crore in the corresponding quarter previous year. Its net loss stood at Rs 1,655 crore. In the corresponding period previous year, the company had posted a net profit of Rs 1,387.48 crore. READ MORE

Sun’s Q1 EBIDTA/PAT beat expectations on account of improved gross margin (product mix, productivity) and lower expenses (SG&A and R&D), note analysts at HDFC Securities.  

"The market share for specialty products was maintained at pre-Covid levels. The scale-up in the specialty is key to drive operating leverage and margins. While the costs pertaining to this business are largely expensed, the revenue traction is yet to be seen. Sun’s balance sheet continues to remain strong (repaid nearly US dollar 200 million debt in Q1). We increase our earnings per share (EPS) estimates by 4%/7% to factor the beat and improvement in gross margin," the brokerage had said in a result review note. 

It maintained an "Add" rating on the stock with the target price of Rs 535.

While the company’s US generics front is going through calibrated product rationalisation, the specialty segment looks promising due to robust product pipeline, steady progress. This metamorphic shift from generics to specialty, however, is likely to weigh on US growth in the near term, said ICICI Securities in a result review note. 

"That said, a higher contribution from specialty and the strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY22. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front. We maintain BUY and arrive at our new target price of Rs 625 based on 26x FY22E EPS of Rs 24.1," the brokerage said further.