Sun Pharma up 12% in 4 days, nears 52-week high; analysts see more upside?

Supported by the Sun Pharma's proven record of strong cash flows, analysts remain confident in gradual deleveraging over time.

Sun Pharmaceutical Industries share price

 

Shares of Sun Pharmaceutical Industries (Sun Pharma) moved higher by 2 per cent to ₹1,807.80 on the National Stock Exchange (NSE) in Thursday’s intra-day trade. The stock of the drug company recovered 3 per cent from its intra-day low of ₹1,761.40. In comparison, the Nifty 50 was down 0.62 per cent at 24,027.80 at 02:15 PM.

 

Sun Pharma was quoting higher for the fourth straight trading days, surging 12 per cent during the period. With the recent up move, the stock has outperformed the market by gaining 5 per cent thus far in the calendar year 2026, as against 8 per cent decline in the Nifty 50. The stock now trades close to its 52-week high of ₹1,851.20 touched on May 2, 2025.

 

 

Why has Sun Pharma outperformed the market?

 

Sun Pharma on Monday, April 27, 2026 announced that it entered into a definitive agreement to acquire Organon in all-cash transaction deal at an enterprise value of $11.75 billion. Organon is a global healthcare company formed through a spinoff from Merck. Organon has six manufacturing facilities across the European Union and emerging markets.

 

In CY25, it reported revenue of $6.2 billion with adjusted EBITDA amounting to $1.9 billion with 30.6 per cent EBITDA margins. For CY25 established brands contributed 55 per cent of Organon revenue while Innovative medicines/ Women’s health contributed 33 per cent, Biosimilar – 11 per cent and others 1 per cent.

 

On the bright side, Organon commands a better margin profile than Sun Pharma. The management iterated combined synergies of in licensing opportunities, geographical diversification (China and South Korea opening-up), $350 million worth cost synergies and biosimilar portfolio addition will help the combined entity to be EPS accretive in the first 12 months post-acquisition. The combined revenues are estimated at ~$12.4 billion, with the innovative portfolio contributing 27 per cent.  CHECK Q4 Results Today 

Brokerages view on Sun Pharma

 

Although the global aspirations are being met with this acquisition, there would be certain challenges. Note that only one-third of the portfolio (Innovative+ biosimilar) is a growth engine and the combined entity has to sweat a lot for the remaining 2/3rd (generics+ established). With significant leverage, the margin of safety is also low. Although Sun enjoys a good acquisition track record, this one is by far the most significant and hence we remain cautiously optimistic, ICICI Securities said in company report. However, the brokerage firm downgraded the rating to 'HOLD' with a target price of ₹1,960 based on SoTP valuation.

 

Analysts at Elara Capital retained a 'BUY' rating on Sun Pharma with a target price of ₹1,968. Any significant post-announcement dip presents a compelling buying opportunity for the stock.

 

Strategically, the acquisition gives Sun Pharma entry into branded generics in women’s health and biosimilars – two areas where Sun Pharma is not present. These two areas face lower competition in fast-growing markets compared to the regular generics business in the regulated markets. Further, Sun Pharma’s penetration into select large markets, such as China and South Korea, improves, the brokerage firm said.

 

Meanwhile, the brokerage firm Choice Institutional Equities sees Sun Pharma’s acquisition of Organon as a transformational deal, doubling revenue to $12 billion with 30 per cent EBITDA margin. It will not only enhance portfolio quality via biosimilars entry but also strengthen leadership in the women’s health segment and raise innovative products’ contribution to revenue to 26 per cent (from 20 per cent). It will also further also mark Sun Pharma’s expansion in China (world’s second-largest market) and reduce the US dependence to 27 per cent (from 31 per cent), analysts said.

 

While the $9.5 billion debt raise and $4 billion cash outlay is a key concern, the brokerage firm believes it reflects a deliberate, debt-deployed strategy rather than a risk-averse stance, underscoring Sun Pharma’s willingness to leverage its balance sheet for a transformational opportunity. 

 

“Supported by the company’s proven record of strong cash flows, we remain confident in gradual deleveraging over time. While interest expense may remain elevated in the medium term, strategic benefits are expected to outweigh near-term drag. We expect full integration from FY27E onwards and we value Sun Pharma on FY28E EPS at 25x, revising target price to ₹2,300 (from ₹1,825) and upgrade our rating to BUY,” the brokerage firm said.  =================================================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.