The India-US trade deal boosted investor sentiment, with the Nifty Pharma index rising over 3 per cent in trade. Sun Pharma was the second-highest gainer, rising 4.5 per cent. Uttam Kumar Srimal of Axis Direct says the reduction in reciprocal tax from 25 per cent to 18 per cent is incrementally positive for Indian pharmaceutical companies with meaningful exposure to the US market, which contributes 30–40 per cent of sector revenues. The 700-basis-point cut lowers landed-cost pressure on exports and improves price competitiveness in the structurally price-erosive US generics market.
While the reciprocal tax remains above historical norms, the revision to 18 per cent materially softens margin and earnings headwinds for Indian pharma exporters. It is expected to improve FY27–28 earnings visibility and provide near-term valuation support, particularly for US-exposed names such as Sun Pharma, among others, the brokerage said.
The company reported a healthy December quarter, with revenue and operating profit growing 13–14 per cent each, while net profit was higher by 17 per cent over the year-ago quarter. Operating profit margin was higher by 24 basis points year-on-year at 30.9 per cent. Excluding the milestone payment of $55 million, however, results were broadly in line with estimates.
The performance was powered by the global specialty segment, India formulations (up 16 per cent), emerging markets (28 per cent higher) and rest-of-the-world (ROW) markets (up 21 per cent). This was offset somewhat by a weak showing in the US generics market, which was up 6 per cent year-on-year but down 4 per cent sequentially. In addition to lower sales of the generic version of cancer drug Revlimid, the company indicated that other products too witnessed price erosion. While there is little clarity on a growth pick-up, there could be an improvement post compliance fulfilment in some manufacturing locations.
Growth in the India business was led by higher volumes and new products. The company launched 12 new products in the quarter, taking the total to 26 products over the past year. The new launches have helped the company strengthen its leadership position in the Indian market with a share of 8.4 per cent. The company is planning to launch the obesity and type 2 diabetes drug glucagon-like peptide-1 (GLP-1) on patent expiry and has received approvals for weight management and type 2 diabetes.
Commenting on the outlook, JM Financial Research expects the company to outperform its single-digit growth guidance for FY26. Strong momentum in India and ROW/emerging markets is encouraging and can continue for the next two years, led by specialty and GLP-1 launches, pointed out Amey Chalke and Abin Benny of the brokerage. While the US generics business might remain subdued, two new specialty launches and continued momentum in the plaque psoriasis medication Ilumya will drive the US specialty business at high teens. The brokerage has a buy rating with a target price of Rs 1,999.
BNP Paribas Research has upgraded its FY26 estimates on the back of the margin beat and retained its outperform rating. Tausif Shaikh of the brokerage pointed out that Sun Pharma has clearly outperformed on operating profit margin despite guiding for lower margins in H2FY26 due to higher marketing spends for new specialty product launches. The brokerage has raised its FY26 operating profit margin estimate by 120 basis points and has kept the target price at Rs 2,250.
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