New Delhi: Shares of Sun Pharmaceutical Industries Ltd on Monday rose over 7% , its biggest gains in three years, after the company reported its first profit growth in six quarters, helped by lower material costs and a one-time tax write back.
Sun Pharma shares closed at Rs499.70 on BSE, up 7.11% from its previous close, its biggest gains since 6 April 2015. In intraday trade, Sun Pharma shares rose 8.17% to Rs504.70 apiece. So far this year it declined nearly 12.46%.
The company’s market cap rose by Rs7,951.2 crore to Rs119,891.20 crore. In terms of equity volume, 11.48 lakh shares of the company were traded on BSE and over one crore shares changed hands on NSE during the day.
Q4 net profit rose 7% from a year ago quarter to Rs1,310 crore—higher than the Rs895 crore profit projected by analysts tracked by Bloomberg. The profit was boosted by a one time tax write back of Rs259 crore and a 39% reduction in raw material costs.
Sun Pharma’s Q4 revenue rose 2% quarter on quarter to Rs6711 crore mainly driven by 12% sequential growth in US sales.
The company said it is hopeful of clearing Halol facility without a US drug regulator inspection by second half of fiscal year 2019. The clearance of this facility is necessary for new product approvals as 40% of the pending abbreviated new drug applications are filed from this facility.
The company said it expects a low double-digit growth in the top line, driven by key speciality product launches Ilumya, Yonsa and OTX-101 in the US, Halol remediation, and ramp-up in Absorica. Analysts expect these factors likely to improve earnings in fiscal year 2019.
“We upgrade Sun Pharma from SELL to BUY as we believe its earnings bottomed in FY18, it has three large specialty product launches in FY19 which suggests the monetisation of this business vertical is underway and its regulatory issues have largely past," said CLSA in a note to its investors.
“While challenges in the US generics space remain and further marketing and R&D investment will be needed for the specialty business (driving a 5% EPS cut for FY19CL), we believe Sun is well-positioned to nearly double its adjusted earnings over the next two years; the execution of its strategy will be the key", the report added. The brokerage firm has increased its target price to Rs600 a share from Rs445 a share.
The company also said that it sees domestic operations growing in excess of 10% year on year against 9% in fiscal year 2018. R&D expense to increase to 8-9% of fiscal 2019 sales with higher spend on specialty products which analyst expects that may improve margins.
“We expect FY19 to be a critical year for Sun’s specialty initiatives, with three key products (viz. Illumya, Seciera, Yonsa) hitting the market and likely scale-up in a few others (Bromsite, Odomzo). Resolution of Halol plant could also release approvals for Elepsia and Xelpros besides driving more generic approvals", said CITI Research in a note to its investors.
Macquarie has also upgraded the stock to “Neutral" from “underperform."
Of the analysts covering the stock, 16 have a “buy" rating, 13 have a “hold" rating, and 13 have a “sell" rating, showed Bloomberg data.
On Monday, Sun Pharma rose 7.11%, or Rs33.15, to 499.70 apiece on BSE, on a day the benchmark Sensex surged 0.69%, or 240.61 points, to end the day at 35,165.48.