Sun Pharmaceuticals’ shares stupendous run on the bourses in the current year has made it the 14th most valuable company on the BSE. While the stock has outpaced the benchmark indices by a huge margin, analysts say the high valuations are also justified given the improvement in sequential growth.
The Vadodara-based generic pharmaceutical company’s market capitalisation was pegged at R1.024 lakh crore on Tuesday after its shares touched a life-time high of R997.50. The stock eventually settled at R990.55, up R8.25, or 0.84%, from Monday’s close.
According to stock exchange data, Sun Pharma’s market cap has now exceeded that of peer companies, Dr Reddy’s Laboratories, Lupin and Cipla. Further, the stock has given returns of 33.94% since January 1, 2013, and a staggering 78.79% in the last one year.
Even as the stock trades at one-year forward price-to-earnings of 31.304 times. the Street continues to have a bullish call on the scrip. The one-year forward PE for Dr Reddy’s Lab and Cipla is pegged at 21.33 times and 21.25 times, respectively. Lupin trades at 26.68 times one-year forward PE.
Analysts say Sun Pharma’s share price gained steam after the company received tentative approval from US Food and Drug Administration (FDA) for its Abbreviated New Drug Applications (ANDA) for generic Januvia (Sitagliptin) tablets and Glumetza (Metformin HCl) extended-release tablets.
For Citigroup, Sun Pharma remains one of the top picks in large-cap pharmaceutical space on expectations of upbeat fourth quarter results and strong commentary from the management. “We expect management commentary to be largely positive and expect sector outperformance to continue... stock (Sun Pharma) valuations appear to reflect company outperformance,” said Citigroup analysts Prashant Nair and Anshuman Gupta in their Q4 results preview.
Moreover, Citi expects FY13 set to end as one of the strong years for Indian pharma companies. Citigroup's Indian Pharma now trades at a 40% premium to the BSE Sensex P/E, the highest in the last seven years.
Nomura Financial Advisory and Securities, in its recent report, stated that Sun Pharma (along with Cadila healthcare and Lupin) is among the fastest growing companies during Q4FY13, with its net sales growing 18.2% y-o-y in Q4.