Sun Pharma target cut: BofA flags risks to consensus earnings, rich valuations
Sun Pharma: BoFA values the stock at 32 times FY27 earnings against its 10-year average of 25.5 times, reflecting its transition to specialty driven growth & the business development optionality.
- Aug 26, 2025,
- Updated Aug 26, 2025 3:41 PM IST
BofA Securities on Tuesday cut its rating on Sun Pharmaceutical Industries Ltd, flagging risks to consensus earnings and stretched valuations. The global brokerage lowered its stance on the stock to ‘Underperform’ and revised its price target to Rs 1,570 from Rs 1,730 earlier.
BofA Securities said Sun Pharma's specialty-driven earnings provides medium-term earnings visibility, but it sees a gradual revenue ramp-up from the new launches against consensus expectations.
"While we could continue to see the company pursuing more specialty M&A, this optionality is priced-in with downside risk from disappointment in scale-up of its recently acquired (& launched) specialty assets. Lastly the MFN news flow continues to be an overhang on its largest specialty drug: Ilumya," BofA Securities said.
Following the development, shares of Sun Pharma fell 3.64 per cent to hit a low of Rs 1,596.35 on BSE.
BofA Securities said while Sun Pharma 's Ilumya launch has exceed initial expectation with continued positive momentum, consensus estimates for the new launches - Leqselvi (alopecia areata drug) & Unloxcyt (SCC drug) do not fully reflect the reimbursement challenges competitive landscape
"We estimate a more gradual revenue ramp-up for these drugs with need for continued investment in sales & marketing for specialty/India growth This implies BofAe EPS being 7-9 per cent below consensus. While there is risk of lower R&D vs guidance, we believe specialty driven earnings upgrade is a key driver given its premium valuations," BofA said.
As far as Sun Pharma stock is concerned, BoFA values the stock at 32 times FY27 earnings against its 10-year average of 25.5 times, reflecting its transition to specialty driven growth & the business development optionality.
"There have seen several M&A to augment the specialty portfolio in the recent years but given lower sales in Winlevi & delay in Leqselvi launch, we believe the new launch momentum will be key to sustain the M&A premium. While still uncertain (not our base case), there is the risk of the MFN drug pricing proposal being applied to Medicare Part B drugs We estimate 75 per cent of Ilumya revenue comes from Part B and therefore, any impact on the pricing due to MFN inclusion is a key risk to earnings & specialty driven valuation premium," BoFA said.
BofA Securities on Tuesday cut its rating on Sun Pharmaceutical Industries Ltd, flagging risks to consensus earnings and stretched valuations. The global brokerage lowered its stance on the stock to ‘Underperform’ and revised its price target to Rs 1,570 from Rs 1,730 earlier.
BofA Securities said Sun Pharma's specialty-driven earnings provides medium-term earnings visibility, but it sees a gradual revenue ramp-up from the new launches against consensus expectations.
"While we could continue to see the company pursuing more specialty M&A, this optionality is priced-in with downside risk from disappointment in scale-up of its recently acquired (& launched) specialty assets. Lastly the MFN news flow continues to be an overhang on its largest specialty drug: Ilumya," BofA Securities said.
Following the development, shares of Sun Pharma fell 3.64 per cent to hit a low of Rs 1,596.35 on BSE.
BofA Securities said while Sun Pharma 's Ilumya launch has exceed initial expectation with continued positive momentum, consensus estimates for the new launches - Leqselvi (alopecia areata drug) & Unloxcyt (SCC drug) do not fully reflect the reimbursement challenges competitive landscape
"We estimate a more gradual revenue ramp-up for these drugs with need for continued investment in sales & marketing for specialty/India growth This implies BofAe EPS being 7-9 per cent below consensus. While there is risk of lower R&D vs guidance, we believe specialty driven earnings upgrade is a key driver given its premium valuations," BofA said.
As far as Sun Pharma stock is concerned, BoFA values the stock at 32 times FY27 earnings against its 10-year average of 25.5 times, reflecting its transition to specialty driven growth & the business development optionality.
"There have seen several M&A to augment the specialty portfolio in the recent years but given lower sales in Winlevi & delay in Leqselvi launch, we believe the new launch momentum will be key to sustain the M&A premium. While still uncertain (not our base case), there is the risk of the MFN drug pricing proposal being applied to Medicare Part B drugs We estimate 75 per cent of Ilumya revenue comes from Part B and therefore, any impact on the pricing due to MFN inclusion is a key risk to earnings & specialty driven valuation premium," BoFA said.