Sun Pharma Shares In The Red After Giving Low Guidance For Coming Year

Sun Pharmaceuticals shares were down on Thursday morning as the company guided for high-single-digit topline growth for FY25 due to higher research and development (R&D) spends.

What Happened: Sun Pharmaceuticals in its March quarter results saw its net profit jump 34% from the previous year to ₹2,654.5 crore. Revenue gained 9% to ₹11,982.9 crore.

EBITDA rose 8.3% to ₹3034 crore. US Formulation sales were up 10.9% to $ 476 million in FY24. The company also declared a final dividend of ₹5 per equity share. 

The company said it will invest to ramp up its speciality business in the US and overseas. R&D is expected to be at 8-10% of sales in FY25. In this quarter, speciality R&D was at 42% of total R&D spends.

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Brokerage Views: HDFC Securities maintained their "buy" call and target price at ₹1,750. According to the brokerage, the key growth drivers for the company are speciality scale-up, traction in US generics business, India business and a strong cash position. The brokerage, however, cut its FY25 earnings per share estimate by 2%. 

JP Morgan maintained its "overweight" call and increased the target price to ₹1,610. The brokerage was impressed by the strong showing in the speciality business which drove the US sales and expects the key businesses to continue to strengthen. JP Morgan said it will monitor the R&D spend as the company has historically underspent their guidance. 

Citi also maintained its "buy" call with a target price of ₹1640. Though the brokerage said the stock will remain under pressure in the near term, it believes the underlying business trends and medium, long-term margin expansion story remain. 

Nuvama Institutional Equities downgraded the company to "hold” and slashed the target price to ₹1,620 due to the cut in FY25 earnings estimate gathered from the management's commentary. Sun Pharma's revenue and EBITDA growth was below the estimates for Nuvama and judging from its earnings guidance, the brokerage sees a mid-single-digit growth for Sun Pharma's exports. 

Price Action: Shares of Sun Pharmaceuticals were trading down 3% to ₹1488 on Thursday morning.

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