In the past one week, Sun Pharma has outperformed the market by surging 16 per cent, as compared to 0.20 per cent decline in the S&P BSE Sensex.
“We are double upgrading Sun stock to ‘Overweight’ in expectation of a revival in its earnings from F21 onwards, driven by steady growth in the base business coupled with plateauing of the current elevated cost structure, leading to positive operating leverage,” analysts at Morgan Stanley said in a report dated July 14, 2019.
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"Ilumya is a 'free optionality'. Sun stock has been a big underperformer, down 41 per cent over the last two years vs. the Sensex up 31 per cent. We expect specialty ramp-up, manufacturing rationalisation, cost control, Halol contribution, etc. to help improve F21 margins. We estimate three-year CAGRs (F20-22) of 13 per cent in sales and 20 per cent in net profit, vs. two-year trailing CAGRs of -4 per cent and -21 per cent," added the report.
The key catalysts include niche approvals for the US by Sun, gOlux-E and gAczone as good opportunities for Taro, recovery in the domestic industry, steady patient enrollment for Ilumya, cost control beyond F20, and potential resolution of regulatory issues, the brokerage firm said.
At 12:35 pm; Sun Pharma was quoting 3 per cent higher at Rs 421 on the BSE, against a 0.18 per cent rise in the benchmark index. The trading volumes on the counter jumped 1.5 times with a combined 10.7 million shares changing hands on the NSE and BSE so far.