InvestorQ : Sun Pharma stock is now below Rs.400. Can I buy the stock at the current price?
vidhya Laxmi made post

Sun Pharma stock is now below Rs.400. Can I buy the stock at the current price?

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1 year ago

The stock has corrected steeply in the last 3 years and over the last one year it has suffered more damage. The good news is that the company is getting out of the NBFC business and the controversial group company marketing its drugs has been absorbed into the group as a subsidiary. That addresses the problem of corporate governance. However, before taking any investment decision on Sun Pharma, here are the few points that you must be fully aware of.

· The company’s US group company, Taro, has been named in one of the cases filed against pharma stocks as being involved in price fixing and charging exorbitant prices to customers. This is unlikely to go down well with the regulator.

· US FDA investigations are still on and in the last year, FDA investigations into Indian pharma companies increased even as it was lower for pharma companies in other countries.

· For the March quarter, Sun Pharma had reported a 57% fall in net profits as the company faced pressure on top line growth, bottom line growth and also on the margins on its products in the US market due to stiff competition.

· Sun’s highest grossing drug in the US, Absorica, is going lose its exclusivity in December 2020 post which generics can erode a substantial portion of its sales. This is again a medium term challenge for the company.

· Lastly, Goldman Sachs, has recently issued a downgrade on the stock and has lowered its price target to Rs.355. The stock, however, does look good from a long term perspective, provide it gets its act together in the short to medium term.