Sun Pharma stocks fell over 13 per cent intraday on Monday after the pharma major announced its fourth quarter results on Friday after market hours. The company’s consolidated net profit for the March quarter stood at Rs 1,223 crore, registering a decline of 14 per cent as compared to net profit of Rs 1,416 crore for the same period of previous fiscal.At 1.53 pm, Sun Pharma stocks were trading 10.40 per cent down at Rs 509.40. The share price opened at Rs 532.80 and touched a high and low of Rs 532.80 and Rs 493, respectively. Sensex was trading 105.70 points up at 31,133.91 during the same time. The company has cited pricing pressure in the US market as the reason behind its weak performance. Later, the share price of the company settled 11.56 per cent down at Rs 502.85.
Pharma sector has been under pressure in the recent past due to regulatory issues and pricing. Investment and stock advisor Sandip Sabharwal told ET Now that pharma sector is not a buy currently and there no positives in sight for the sector. On the future movement, Sabharwal added that he expects to see value compression in pharma sector and continues to believe pharma sector is a ‘value trap’.
Brokerage House Sharekhan has also downgraded its recommendation on the stock and has given a ‘Reduce’ rating with a target price of Rs 510. It said,”. The company’s weak performance was led by a 34% YoY fall in the US business, owing to mounting pricing pressure and lack of product approvals due to the USFDA observations on the Halol facility. Weak guidance due to lingering uncertainties: The USFDA has classified the company’s Halol facility under the Official Action Indicated (OAI) post the re-inspection done in December 2016. This indicates further delay in the resolution of the Halol plant issue (expect remediation to be over by the end of FY2018 post which the USFDA will again re-inspect the plant), and till then the company will not receive any new product approval.”
The company while announcing its fourth quarter results had said that its US sales might fall this year because of pressure on drug prices, signalling tough market conditions in the United States for generic drugmakers. “The U.S. generics industry is facing rapidly changing market dynamics, (and) increased competitive intensity and customer consolidation is leading to pressure on pricing,” Sun’s Managing Director Dilip Shanghvi said on a call with analysts after the company reported lower than expected fourth-quarter earnings.
Sun Pharma’s management has guided for a single digit de-growth in sales for FY2018 after taking into consideration uncertainties like pricing pressure, GST roll-out, price cuts in the domestic business in the near term, the management has guided for a single digit de-growth in sales for FY2018.
The company’s income from operations during the period also declined to Rs 6,825 crore, as against to Rs 7,415 crore in the same period of previous fiscal.
According to Reuters, global brokerage house Morgan Stanley has slashed their target price on the stock by 32 per cent. It said, “Sun is facing a confluence of challenges – lack of new approvals owing to Halol, rising cost structure from specialty build-out/R&D, and erosion in the US. business.”