Should you buy, sell or hold? What brokerage says, target price

Sun Pharmaceutical Industries shares ended 0.87% higher at ₹1,778.25 apiece on the BSE on Friday, shrugging off a 36.36% year-on-year decline in consolidated net profit for the September quarter. The stock has gained 2.02% over the past week and 1.04% over the past two weeks.

The drugmaker reported a consolidated net profit of ₹1,988.53 crore for the July-September quarter, compared with ₹3,124.95 crore in the corresponding period last year. The decline was largely due to exceptional expenses linked to its proposed acquisition of Organon and litigation in the US.

Revenue, however, continued to grow. Consolidated revenue from operations rose 11.9% year-on-year to ₹16,198.71 crore from ₹14,478.31 crore a year earlier.

India remained a key growth driver, with formulation sales in the domestic market climbing 17.3% to ₹5,552.3 crore. The segment contributed 34.5% to Sun Pharma's consolidated sales during the quarter.

Global innovative medicines also supported revenue growth. Sales in this business rose 6.9% to around $356 million, accounting for 21.1% of the company's total sales. Emerging markets contributed another 20.7% to consolidated revenue.

During the post-results earnings call, the company said growth in innovative medicines was supported by demand across the US and international markets, with products including Ilumya, Ciqua and Odumzo contributing to performance.

However, higher costs weighed on the bottom line. Total expenses increased to ₹12,287.83 crore during the quarter from ₹10,780.62 crore in the year-ago period.

Sun Pharma reported exceptional charges of around ₹1,269 crore, largely comprising approximately ₹923 crore towards the settlement of a US generic-pricing antitrust litigation case and ₹346 crore in expenses related to the proposed Organon acquisition. The management indicated that further transaction-related costs could be incurred before the deal is completed.

The company said the Organon acquisition remains on track for completion by early 2027, subject to the fulfilment of the remaining customary closing conditions.

Commenting on the quarterly performance, Managing Director Kirti Ganorkar said growth was led by strong momentum in India, emerging markets and other international markets.

He also highlighted developments in the company's innovative medicines portfolio. Ilumya has received US approval for treating adults with active psoriatic arthritis, while Sun Pharma has strengthened its cardiovascular portfolio by licensing lerodalcibep, a PCSK9 inhibitor, for markets outside the US and China.

Should you buy, sell or hold?

Choice Institutional Equities has maintained its ‘Buy’ rating on Sun Pharmaceutical Industries with an unchanged target price of ₹2,300, implying a potential upside of 29.9% from the 31 October closing price of ₹1,778. The brokerage said the company remains well-positioned to sustain healthy growth, supported by its leadership in the Indian pharmaceutical market, a strong product launch pipeline and expansion in specialty and innovative medicines.

According to Choice Institutional Equities, Sun Pharma's core business delivered a healthy performance in the September quarter, although exceptional charges related to the US antitrust settlement and proposed Organon acquisition weighed on reported earnings. Revenue increased 11.9% year-on-year and 5.9% sequentially to ₹16,198.7 crore, marginally ahead of the brokerage's estimate of ₹16,123.6 crore.

EBITDA rose 4.8% year-on-year and 7.4% quarter-on-quarter to ₹4,743.9 crore, while the EBITDA margin contracted 198 basis points year-on-year to 29.3%. Reported net profit declined 36.2% year-on-year to ₹1,988.5 crore. However, after adjusting for exceptional items of ₹1,268.8 crore, adjusted net profit stood at ₹2,792.4 crore, Choice Institutional Equities said.

The brokerage expects Sun Pharma's growth momentum to continue, supported by its specialty and innovative medicine portfolio. While the US business faces near-term pressure from lenalidomide erosion and slower growth in Ilumya, Choice believes stronger performance in India and emerging markets should partly offset these challenges. It expects Ilumya's performance to normalise over the next two to three quarters.

In India, the brokerage highlighted the company's continued leadership in the pharmaceutical market and semaglutide segment, along with the launch of 15 products in the September quarter. It expects the domestic business to continue outperforming the Indian Pharmaceutical Market, supported by new launches and volume growth.

Choice Institutional Equities also sees emerging markets and the rest of the world business sustaining their growth momentum, backed by branded generics and a rising contribution from innovative medicines.

The brokerage has trimmed its FY27 and FY28 earnings estimates by 3.6% and 1.1%, respectively, to factor in the expected weakness in the US business. However, it expects Sun Pharma to deliver an 11.7% revenue CAGR over the next three years, excluding the contribution from Organon.