Kotak cuts Sun Pharma stock target to INR 1,875, retains Add rating

Kotak analyst Alankar Garude revised Sun Pharmaceutical's price target to INR 1,875 from INR 1,900, maintaining an Add rating, after Q4 FY25 results aligned with expectations despite slightly lower-than-anticipated global specialty sales of $295 million. While FY26 guidance projects mid-to-high single-digit sales growth due to macroeconomic uncertainties, the analyst forecasts a 13% global specialty sales CAGR from FY25-28E, driven by strong prescription trends, and anticipates double-digit sales CAGR in non-US markets, resulting in a projected 13% EPS CAGR for the same period.

Analysis

Kotak's recent assessment of Sun Pharmaceutical Industries Ltd. (SUNP:IN) indicates a slight downward revision in the price target to INR 1,875 from INR 1,900, while the 'Add' rating is maintained. This revision follows Sun Pharma's Q4 FY2025 operating results, which aligned with expectations, even as global specialty sales at $295 million were marginally below Kotak's forecast. A key positive driver identified by the analyst is the specialty segment, with a projected 13% compounded annual growth rate (CAGR) for global specialty sales between FY2025 and FY2028, fueled by strong prescription trends. This contrasts with Sun Pharma's more cautious FY2026 guidance, which forecasts mid-to-high single-digit overall sales growth, attributed to macroeconomic uncertainties. Despite this cautious company outlook, Kotak anticipates robust double-digit sales CAGRs in Sun Pharma’s non-US markets, although these could be somewhat moderated by increased commercialization expenses for products such as Leqselvi and Unloxcyt. Based on these factors, Kotak projects a healthy 13% EPS CAGR for Sun Pharma from FY2025 to FY2028, suggesting sustained earnings growth potential despite the tempered near-term sales outlook.

Key Decisions for Investors

• Investors should note the sustained 'Add' rating and the analyst's projection of a 13% EPS CAGR through FY2028, driven by anticipated strength in the specialty segment despite a slight price target reduction.
• Closely monitor Sun Pharma's global specialty sales performance relative to the forecasted 13% CAGR, especially given the company's cautious FY2026 overall sales growth guidance and prevailing macroeconomic headwinds.
• Evaluate the impact of commercialization expenses for new products, Leqselvi and Unloxcyt, on margin realization and overall growth in non-US markets, as this could temper the expected double-digit sales growth in these regions.