Brokerages offer mixed views on Sun Pharma post steady Q3; buy, sell, hold?

Brokerages remained divided on Sun Pharmaceuticals after it delivered a steady and in line third quarter earnings performance for the financial year 2024-25 (Q3FY25), with some bullish on specialty and domestic businesses, while others were cautious due to weaknesses in US generics and pipeline uncertainties. Sun Pharmaceuticals share price rose 2.66 per cent at Rs 1,789.50 a piece on the BSE in Saturday's intraday trade. 

 

Analysts noted that Sun Pharma’s India business that grew 14 per cent Y-o-Y in Q3FY25 was led by 12 new product launches, and high volumes versus pricing-led growth for the Indian Pharmaceutical Market (IPM). On the other hand, US sales experienced a dip of 1 per cent Y-o-Y and 8 per cent Q-o-Q, owing to lower Revlimid sales and an overall weakness in generics. 

 

Global specialty sales (excluding-milestone income) increased 18 per cent Y-o-Y to $325M, aided by ex-US inventory buildup, brokerages noted. 

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Those at Emkay Global said that Sun Pharma’s domestic and global specialty sales were strong in Q3FY25, the decline in US generics—specifically lower-than-expected Revlimid sales—was a concern. The brokerage anticipates a QoQ dip in specialty sales in Q4 due to inventory buildup in Q3 but remains positive on Sun’s long-term margin expansion, maintaining a “Buy” rating with a target price of Rs 2,400. 

 

Brokerages also flag concerns over Sun’s R&D cuts, which may boost near-term earnings but could affect its product pipeline in the long run. Additionally, regulatory uncertainties around alopecia areata drug Leqselvi persist, with legal hearings expected in April 2025, analysts at Nuvama Institutional Equities said in a report. 

 

Despite these concerns, Nuvama maintained a “Hold rating,” slightly increasing the target price to Rs 1,830 from Rs 1,815 valuing the stock at 32 times its FY27 earning per share (EPS).  Analyts at Motilal Oswal agreed that delay in R&D projects is improving near-term profitability, but a faster implementation of R&D projects is must for sustainable global specialty engine of growth. They reiterated "Buy" rating with a target of Rs 2,160.    Stock Market Live Updates

 

While Sun Pharma continues to demonstrate strength in its branded and specialty businesses, concerns around US generics, R&D investments, and regulatory hurdles leave brokerages divided on its outlook.

 

Goldman Sachs retained its “Sell” call on Sun Pharma, lowering the target price to Rs 1,625 from Rs 1,650, citing valuation concerns and pipeline delay risks, with FY24-27 revenue expected to grow in high single digits. In contrast, Jefferies maintained a “Buy” rating, raising the target price slightly to Rs 2,265 from Rs 2,260, highlighting strong India performance but moderate US growth. They see momentum in global specialty sales, expect more specialty deals, and note a benign pricing environment in the US, according to reports. 

 

Q3FY25 financial print

India’s largest drug-maker, Sun Pharma reported a 15 per cent Y-o-Y growth in consolidated net profit to Rs 2,903.3 crore for Q3FY25, with revenue rising 10.5 per cent to Rs 13,675.4 crore. Sequentially, revenue grew by 2.9 per cent, but PAT fell 4.5 per cent. 

 

Domestic formulation sales grew 13.8 per cent to Rs 4,300.4 crore, representing 32 per cent of total revenue. US formulation sales declined 0.7 per cent to $474 million (30 per cent of revenue), while emerging market sales rose 10.1 per cent to $277 million (17 per cent of revenue). 

 

Other international markets saw a 21 per cent growth to $259 million (16 per cent of revenue). R&D investment for the quarter was Rs 845 crore, or 6.3 per cent of total sales, compared to Rs 824.5 crore in Q3FY24.  At 09:19 AM; the share price of the company was up 1.80 per cent at Rs 1774.45 per share, against the BSE Sensex's rise of 0.11 per cent at 77,588.82 level.