'Buy' Sun Pharma Shares Maintains Nirmal Bang Despite Minor EPS Cuts Due To Near-Term Headwinds

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Nirmal Bang Report

We expect Sun Pharmaceutical Industries Ltd.'s revenue/Ebitda/PAT to register a CAGR of 8.3%/11%/8.9% over FY25-FY27E, driven by continued strong growth in India and further leveraging of the specialty pipeline.

Ebitda margins are expected to remain healthy at 30%. While margin improvement from existing specialty products and favorable mix changes are likely, these will be partially offset by ongoing investments in the expansion of the specialty franchise.

ROE and ROCE are expected to remain strong at 15.4% and 15.1%, respectively, by FY27E.

We project healthy cumulative free-cash-flow generation of Rs 238 billion over FY26E-FY27E.

We have revised our estimates downward to reflect the increased operating expenses, softer topline growth, and a rising tax burden.

However, despite these near-term pressures, we remain structurally positive on Sun Pharma’s long-term outlook. The company is well positioned to benefit from:

1. Sustained outperformance in India branded formulations led by superior execution and volume-led growth;

2. Commercial ramp-up in US specialty driven by LEQSELVI and UNLOXCYT launches;

3. Inorganic opportunities in dermatology, ophthalmology, and onco-derma backed by a strong balance sheet; and

4. Margin resilience, as the company invests in specialty commercialization, while maintaining operating discipline.

Sun Pharma’s five-year average P/E stands at 26x. We now value it at 35x FY27E EPS of Rs 58.7, arriving at a target price of Rs 2,054. We maintain our Buy rating on the stock.

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