Sun Pharma shares fall 5.7% post Q1 results: What should investors do now?

Mint

2 days ago

Sun Pharmaceutical Industries saw its shares tumble by 5.7 percent to an intraday low of ₹ 1,608.30 on the BSE on Friday, following the announcement of its first-quarter results for FY26. The stock's decline was largely triggered by a sharp 20 percent year-on-year fall in consolidated net profit to ₹ 2,278 crore for the June 2025 quarter, compared to ₹ 2,836 crore in the same quarter last year. On a sequential basis, however, net profit rose 6 percent from ₹ 2,150 crore reported in the March 2025 quarter. Adding to the negative sentiment was the fact that several brokerages revised their target prices downward for the pharma major.
Despite the profit drop, Sun Pharma posted a healthy top-line performance. The consolidated revenue grew over 9 percent year-on-year to ₹ 13,851 crore, driven by solid momentum across its key markets—including India, the US, and Rest of World (ROW) geographies. EBITDA rose by 19.2 percent to ₹ 4,302 crore, with margins expanding to 31.1 percent from 28.5 percent in the same period last year.
Commenting on the performance, Dilip Shanghvi, Chairman and Managing Director of Sun Pharma, said the company delivered a strong quarter with consistent growth across markets. 'India continues to show strong momentum, contributing meaningfully to the overall performance. The U.S. launch of LEQSELVI is a significant milestone, expanding our dermatology portfolio and strengthening our Innovative Medicines business,' he said.
Brokerages React: Trimming Targets, Watching Specialty Growth
HDFC Securities lowered its FY26 and FY27 EPS estimates by 7 percent and 6 percent respectively and cut the target price to ₹ 1,960, valuing the stock at 33x Q1FY28E EPS. While it expects strong momentum in the specialty segment—including a ramp-up in Leqselvi and launch of Unloxcyt—HDFC Sec noted that increased investment spending of USD 100 million starting Q2FY26 and a 25 percent tax guidance were negatives. However, it maintained a positive outlook on India formulations and continued R&D spends (6–8 percent of sales), expecting a mid- to high-single-digit revenue growth trajectory and stable EBITDA expansion.
JM Financial maintained a 'Buy' rating with a target price of ₹ 1,999. The brokerage termed Sun Pharma's Q1FY26 performance strong due to a better product mix and lower cost of goods sold. JM highlighted robust 14 percent YoY growth in India business and 17 percent growth in global specialty. While US generics remained under pressure, exports from Emerging Markets and ROW remained firm. The brokerage expects the new specialty launches, such as Leqselvi and Unloxcyt, alongside expansion of Ilumya and Winlevi, to drive the next leg of growth. Sun Pharma is projected to clock an 11 percent revenue CAGR over FY25–FY28, supported by a healthy cash balance of USD 3.5 billion and continued focus on oncology, ophthalmology, and dermatology.
Motilal Oswal Financial Services reduced its target price to ₹ 1,960 from ₹ 2,000, while maintaining a 'Buy' call. The brokerage expects Sun Pharma's innovative and branded portfolio to continue providing earnings support, although it trimmed FY26 and FY27 EPS estimates by 5 percent and 4 percent respectively due to higher operating costs and tax outgo. It believes regulatory clarity on US tariffs remains a key monitorable but sees recent launches like Leqselvi and Ilumya pipeline filings boosting the company's specialty segment. It anticipates a 14 percent CAGR in earnings through FY27.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.