Sun Pharmaceutical Industries’ robust performance in the second quarter of the fiscal year has led brokerages to hike their price targets for the stock.

What Happened: Despite a sequential decline in U.S. sales, the drugmaker reported a 5% year-on-year increase in second-quarter net profit, reaching ₹2,375.5 crore, and an 11.3% rise in revenue to ₹12,192 crore. Both figures exceeded market estimates.

The company’s strong earnings growth can be attributed to a 19.2% surge in global specialty sales and an 11% increase in India formulation sales. Sun Pharma has also maintained its research and development guidance of 7%-8% for the financial year ending 2024 (FY24) as it focuses on securing its next phase of growth. Dispatches from Mohali have resumed, which is expected to contribute to the growth of US sales.

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What Analysts Say: Analysts at Citi raised their price target for the stock by over 8% to ₹1,380, expecting a potential recovery in the U.S. generics segment and a more favorable margin outlook for the company. Citi also increased its earnings estimates for FY24 and FY25 by 9% and 4%, respectively.

Nuvama slightly increased its price target for the stock to ₹1,330 while maintaining a “buy” rating. Nuvama expressed confidence in Sun Pharma’s potential, citing a steady second-quarter performance, a recovery in the Indian market and promising prospects for specialty drugs. Specialty products like Winlevi and Sezaby are anticipated to contribute to growth, the brokerage said.

Global brokerage firm Macquarie remains positive on Sun Pharma’s specialty portfolio and its core earnings growth driven by products like Ilumya, Winlevi and Cequa. Jefferies also sees a ramp-up in specialty sales and strong presence in India and emerging markets as key drivers for the company’s core earnings growth. Motilal Oswal continues to have a bullish outlook on Sun Pharma’s growth prospects, believing it is well-positioned to strengthen its specialty franchise.

Price Action: Sun Pharma’s share price was up 1.68% at ₹1,130.35 in afternoon trade. The stock has gained nearly 14% so far this year.

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