Sun Pharmaceutical Industries Ltd. posted a mixed fourth quarter on Thursday and announced a softer-than-expected financial year 2026 guidance. However, Citi and Macquarie maintained positive outlooks, citing long-term growth potential and ongoing investments in specialty products.
The fourth quarter results were modestly below estimates. Macquarie reported a 1% revenue miss and 6% Ebitda miss, while Citi noted that strength in India and emerging markets helped offset weakness in US generics. Specialty revenues grew 9% year-on-year to $295 million, while India sales rose 14% year-on-year. Ebitda margin improved by 60 basis points year-on-year to 26.4%, despite limited contribution from generic Revlimid.
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Citi has raised its target price to Rs 2,210 from Rs 2,080, rolling forward to March 2027 earnings. Macquarie maintained its Rs 2,135 target, noting upside potential despite a modest operating miss. Both firms reduced financial year 2026 EPS estimates due to launch costs and higher tax rates but left fiscal 2027 estimates unchanged.
Management guided for mid- to high-single-digit revenue growth for financial year 2026, below the 11% expected by consensus of Macquarie. Citi attributes the conservative outlook to regulatory and geopolitical uncertainty rather than core business issues. The brokerage expects 9% revenue growth in fiscal 2026, supported by India and emerging markets, new launches in specialty, and a bottoming out of generics.
The drug maker has planned $100 million in financial year 2026 spending related to US launches of Leqselvi and Unloxcyt. While this weighs on near-term margins, both brokerages believe the investment is non-recurring and sets the stage for fiscal 2027 margin expansion. Citi models flat fiscal 2026 Ebitda margins, followed by a 200-basis points improvement in the next fiscal as launch expenses taper and new products gain traction.
The success of Leqselvi and Unloxcyt will be key, said Citi. Both products have strong clinical profiles but face entrenched competition from Pfizer and Regeneron. Sun Pharma's willingness to spend aggressively signals a firm commitment to building its specialty franchise.
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