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Credit Suisse upgrades Sun Pharma to ‘Outperform,’ profit surge predicted

Credit Suisse has recently updated Sun Pharma from ‘Neutral’ to ‘Outperform,’ as a result of its heavy investment in seven key areas. The pharmaceutica...

Catherine Sturman
|Sep 21|magazine6 min read

Credit Suisse has recently updated Sun Pharma from ‘Neutral’ to ‘Outperform,’ as a result of its heavy investment in seven key areas.

The pharmaceutical industry is becoming an increasingly competitive market, with growing cost pressures, delays in the approval of new drugs, against a growing demand for personalised healthcare services.

However, the decision by Credit Suisse showcases its growing confidence in Sun Pharma and its growing profit margins, leading the company’s shares to rise by up to 5%.

“Sun has already invested $600 million in seven specialty assets. Our proprietary analysis shows peak sales of these assets should be $700 million,” said Credit Suisse.

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“Increasing contribution of specialty addresses growth concerns in generics and helps Sun revert to 20% profit growth trajectory. Strong free cash flow (over $500 million) should help acquire more assets and deepen presence in chosen specialties. Monetisation has already started with two drugs in the market, and the lead derma drug MK-3222 should be launched next year.”

Sun Pharma has also invested significantly in its research and development capabilities. Approximately 10% of its revenue will be invested in this area throughout 2018. However, the company is still awaiting positive news surrounding its Halol plant, where issues have still not been completely resolved.

Nonetheless, up to 20 out of 44 brokerages have a “buy” rating according to data from Bloomberg. Despite Sun Pharma’s successes, it still has a way to go to attract further positive reviews.