InvestorQ : Do you see the stock of Sun Pharma crossing Rs1,000 last wee as a positive signal?
prachi Patwardhan made post

Do you see the stock of Sun Pharma crossing Rs1,000 last wee as a positive signal?

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sara Kunju answered.
1 month ago
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During the previous week, the stock of Sun Pharma crossed the Rs1,000 price market for the first time since March 2015 i.e. after nearly 90 months. Even in the post COVID scenario when pharma stocks rallied very hard, Sun Pharma did not manage to cross the Rs1,000 mark. The problems appear to have started with the acquisition of Ranbaxy combined with the generic pricing challenge in the US market. Last week, the stock touched a high of Rs1,013 but closed the week at around the Rs990 levels. This is despite the recent hiccup faced the stock on the Taro write off.

The next trigger will be the earnings announcement for Q2FY23 on 01st November 2022. In terms of positive developments, Sun Pharma has been deriving benefits of operating leverage and has also managed to consistently scale up the specialty business. This is the relatively higher margin business compared to pure generics. Sun Pharma is the top pharma pick for brokers like BNP Paribas. While BNP Paribas expects the overall pharma bottom line to contract by 11%, it expects Sun Pharma to outperform these numbers within the pharma space. This would be on the back of strong EBITDA margins of above 25% for Sun Pharma.

To play devil’s advocate, some of the challenges like pricing pressures in US generics and supply chain disruptions are here to stay. However, domestic recovery could be a major trigger for Sun Pharma. Also, the currency depreciation is likely to favour Sun Pharma. In addition, the prices of most raw material have started falling; apart from lower crude prices and shipping rates. This will also be value accretive to Sun Pharma. Clearly, there is more to the story of the stock breaching a 7-year high and it is not just a technical factor. For now, the undertone remains positive.

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