Sun Pharma’s share price continues to be under pressure and is down 2% in trade today. Nomura maintained its ‘Neutral’ rating on the stock and retained a target price of Rs 1,970 per share. This implies a mere 17% upside from current levels. One of the reasons why the brokerage house does not see any substantial upside is because of the clearance worries around the Halol facility.
Here are the factors behind Nomura’s Neutral call on Sun Pharma-
Nomura on Sun Pharma: Limited financial upside from Halol unit resolution
The Halol plant was issued eight observations by the USFDA. Nomura said it awaits the clarity on the observations. However, clearance of the site can be a marginal positive. The company announced on 14 June 2025 that the USFDA issued eight observations to the Halol plant after a Good Manufacturing Practices (GMP) inspection, which is somewhat high. “We await further details on the observations,” said Nomura.
The market currently does not anticipate any material upside from the resolution of the issues at the Halol plant. Even if the USFDA clears the site, the impact is expected to be only marginally positive, with revenue potential from earlier approved products estimated at a maximum of approximately $50 million. As a result, Nomura expects the stock to perform in line with Nifty Pharma.
Also, the value of pending Abbreviated New Drug Applications (ANDAs) from this site may have also diminished significantly due to delays.
Nomura on Sun Pharma: Persistent regulatory challenges at Halol facility
The recent regulatory scrutiny suggests a challenging environment for the facility and limits its potential as a significant positive catalyst for the stock. The Halol facility has a history of regulatory issues, including multiple adverse USFDA inspection outcomes over the years. It received a warning letter in 2015 and has been classified as Official Action Indicated (OAI) since March 2020.
Nomura on Sun Pharma: Management changes to help transition
Also, Sun Pharma has elevated Kirti Ganorkar to Managing Director and Dilip Shanghvi to Executive Chairman, a gradual transition to the next generation of leadership. Nomura expects that the focus is on operational continuity and preparing Aalok Shanghvi for future leadership.
“We expect Mr Kirti to be in the role of Managing Director over the next 4-5 years, after which we expect Mr Aalok Shanghvi to eventually take over the role. Mr Aalok’s role has been expanding in the company, and he is being prepared to head the company’s execution eventually,” said Nomura.
These changes are not seen as a major disruptive event or a significant catalyst for immediate stock outperformance.
Nomura on Sun Pharma: Positives priced in already
In December 2022, the import alert was issued at Halol, and since then, Sun Pharma’s stock has increased by 72%. This performance is in line with the Nifty Pharma Index and significantly outperforms the broader market, which was up 33% over the same period.
This outperformance was primarily driven by strong growth in the company’s domestic formulation and speciality categories, suggesting incorporation of many strengths in the current market price. This limits the scope for substantial further upside that would justify a “Buy” rating from Nomura.