Incremental gains for the company, and the listed pharma universe more broadly, also stemmed from positive sentiment around the India–US trade deal.
About a third of Sun Pharma’s revenues come from the US market.
Photograph: Francia Mascarenhas/Reuters
Key Points
- The India–US trade deal lifted investor sentiment, with the peer index, Nifty Pharma, also registering strong gains
- Performance was driven by the global specialty segment
- Growth in the India business was led by higher volumes and new products
- There is a ‘buy’ rating with a target price of Rs 1,999
A strong third-quarter (October–December/Q3) performance for 2025-26 (FY26) has helped the stock of India’s largest listed pharmaceutical (pharma) company, Sun Pharmaceutical Industries, gain about 7 per cent since the start of February.
Incremental gains for the company, and the listed pharma universe more broadly, also stemmed from positive sentiment around the India–US trade deal.
About a third of Sun Pharma’s revenues come from the US market.
Given the Q3 performance, most brokerages have upgraded the stock and assigned it a ‘buy’ rating.
The India–US trade deal lifted investor sentiment, with the peer index, Nifty Pharma, also registering strong gains.
Analyst Uttam Kumar Srimal of Axis Direct says the reduction in reciprocal tax from 25 per cent to 18 per cent is incrementally positive for Indian pharma companies with meaningful exposure to the US market, which contributes 30-40 per cent of sector revenues.
The 700-basis point (bp) cut lowers landed cost pressure on exports and improves price competitiveness in the structurally price-erosive US generics market.
While the reciprocal tax remains above historical norms, the revision to 18 per cent materially softens margin and earnings headwinds for Indian pharma exporters.
It is expected to improve earnings visibility for 2026-27 through 2027-28 and provide near-term valuation support, particularly for US-exposed names such as Sun Pharma, the brokerage says.
The company reported a healthy Q3, with revenue and operating profit growing 13–14 per cent each, while net profit rose 17 per cent year-on-year (Y-o-Y).
Operating profit margin improved by 24 bps Y-o-Y to 30.9 per cent.
Excluding the milestone payment of $55 million, however, results were broadly in line with estimates.
Performance was driven by the global specialty segment, India formulations (up 16 per cent), emerging markets/EMs (up 28 per cent) and rest of the world (RoW) markets (up 21 per cent).
This was partly offset by a weak showing in the US generics business, which grew 6 per cent Y-o-Y but declined 4 per cent sequentially.
Apart from lower sales of the generic version of cancer drug Revlimid, the company indicated that other products also saw price erosion.
While clarity on a growth pickup remains limited, improvement could follow compliance fulfilment at some manufacturing locations.
Growth in the India business was led by higher volumes and new products.
The company launched 12 new products during the quarter, taking the total to 26 launches over the past year.
These have helped strengthen Sun Pharma’s leadership position in the domestic market, where it now commands an 8.4 per cent share.
The company plans to launch glucagon-like peptide-1 (GLP-1) drugs for obesity and Type 2 diabetes upon patent expiry and has received approvals for weight management and Type 2 diabetes indications.
Commenting on the outlook, JM Financial Research expects the company to outperform its single-digit growth guidance for FY26.
Strong momentum in India and the RoW/EMs is encouraging and could continue over the next two years, led by specialty and GLP-1 launches, analysts Amey Chalke and Abin Benny say.
While the US generics business may remain subdued, two new specialty launches and continued momentum in the plaque psoriasis drug Ilumya are expected to drive US specialty growth in the high teens.
The brokerage has a ‘buy’ rating with a target price of Rs 1,999.
BNP Paribas Research has upgraded its FY26 estimates following the margin beat and retained its ‘outperform’ rating.
Analyst Tausif Shaikh says that Sun Pharma has outperformed on operating profit margin despite guiding for lower margins in the second half of FY26 due to higher marketing spends for new specialty launches.
The brokerage has raised its FY26 operating margin estimate by 120 bps and maintained its target price at Rs 2,250.
