Motilal Oswal Financial Services has reiterated its BUY recommendation for Sun Pharma, assigning a 12-month target price of Rs 1,960, with the stock currently trading at Rs 1,690. The rating is anchored in Sun Pharma’s robust expansion within its innovative medicine portfolio, its resilience in branded generics, and consistent margins across diverse geographies. As India’s largest pharmaceutical enterprise, Sun Pharma confronts both headwinds and tailwinds, with product launches and deepening market penetration set to propel it ahead of large-cap peers.

Motilal Oswal's BUY Call for Sun Pharma

Motilal Oswal underscores Sun Pharma’s superior execution in specialty and innovative medicine segments, with global specialty sales surpassing generics in the US for the first time. Despite earnings moderation due to amplified operational expenses and reduced other income, the company maintains strong momentum in emerging and developed markets. The report revises estimates downward to reflect increased marketing spend and higher tax rates but remains confident in Sun Pharma’s strategic positioning. Investors are advised to accumulate the stock, aiming for Rs 1,960, as sustained launches and stronger branded portfolios are expected to drive earnings CAGR exceeding 11% over the next three years.

BUY Recommendation and Target Price

Motilal Oswal’s research analysts assign a BUY rating to Sun Pharma, supported by a 32x 12-month forward earnings valuation, targeting Rs 1,960 for 2026. The recommendation is based on Sun Pharma’s market leadership and operational strength across branded and specialty portfolios.

Standout Performance: Innovative Medicines

The company’s innovative branded product portfolio exhibited powerful traction, especially in the United States, where specialty sales overtook generics for the first time. Sun Pharma’s specialty sales grew 16.6% year-over-year to $644 million, with continued expansion in all target geographies. Ilumya, Cequa, and Odomzo remain key drivers, complemented by upcoming launches like Unloxcyt and pipeline filings for new indications such as psoriatic arthritis.

Financial Metrics and Stock Levels

Quarterly results reveal in-line EBITDA and revenue figures, with moderated margins resulting from higher operating expenditure. Gross margin slipped by 40bps to 79.3%, while EBITDA margin contracted 60bps to 27.9%. Adjusted PAT for the quarter dropped 3.8% to Rs 27.9 billion, driven mainly by lower other income. Forward estimates for FY26 to FY28 anticipate:

• Sales reaching Rs 574.7–701.1 billion
• EBITDA between Rs 159.6–207.5 billion
• EPS improving from Rs 49.2 (FY26E) to Rs 64.7 (FY28E)
• PE multiples easing from 34.3x (FY26E) to 26.1x (FY28E)
• ROE projected at 15.4–16%

Geographic and Portfolio Strengths

Sun Pharma posted resilient growth across domestic, US, emerging, and Rest of the World markets. Domestic formulation sales rose 11% year-on-year, while ROW segment expanded by 22.7% and emerging markets by 15.7%. Specialty and branded products remain favored, with anti-diabetic, cardiac, and neuro portfolios outperforming, offsetting challenges from intensified generic competition and reduced Revlimid volumes.

Research, Pipeline & Strategic Initiatives

The company’s innovative R&D accounted for 38% of total R&D spending and 10% of quarterly global innovative medicine sales. Sun Pharma received multiple regulatory approvals, filed new ANDAs, and maintained a robust pipeline encompassing metastatic cancers, autoimmune diseases, diabetes, and osteoarthritis. Scheduled launches and regulatory filings—especially Unloxcyt and Ilumya for new indications—assert its ambitions for sustained specialty-driven revenue.

Operational Dynamics and Market Challenges

Expenses surged to support aggressive marketing and promotional activities, thereby tempering EBITDA growth after eight strong quarters. Working capital requirements increased over six months but are expected to normalize. Regulatory trends—particularly those reducing biologics costs—are likely to heighten competition, but Sun Pharma retains clarity on capital deployment and sales force expansion to support new launches.

Risk Factors and Mitigation

Motilal Oswal notes risks such as higher-than-expected pricing pressure, escalated regulatory scrutiny, and slower-than-projected market penetration for upcoming innovative products. Earnings estimates for FY26–FY28 have been trimmed to factor these, but mitigating actions include diversified revenue streams, disciplined cost controls, and focus on high-value specialty drugs.

Investor Strategy and Levels to Watch

The current market price stands at Rs 1,690, which positions Sun Pharma as attractively valued relative to its forward growth prospects. The 52-week band is Rs 1,910–1,547, with the research house advocating accumulation on dips toward Rs 1,600, while targeting Rs 1,960 as a medium-term exit level. Long-term investors are encouraged to hold, as Sun Pharma’s innovation, market strength, and execution should deliver robust returns exceeding 15% over 12 months.