SUNPHARMA - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 3.7

📊 Core Financials: Sun Pharma shows healthy ROE (17.8%) and ROCE (16.8%), indicating efficient capital usage. Debt-to-equity at 0.56 is moderate, manageable but higher than peers. Quarterly PAT dropped sharply (-32.7%), reflecting margin pressure. Cash flows remain stable due to scale, but profitability volatility is a concern.

💹 Valuation Indicators: Current P/E of 89.6 is far above industry average (30.6), suggesting significant overvaluation. Book value of 99.2 ₹ implies a P/B ratio of ~17.6, which is expensive. PEG ratio of 1.22 is reasonable, but intrinsic value appears lower than current market price, highlighting stretched valuations.

🏭 Business Model & Competitive Advantage: Sun Pharma is India’s largest pharmaceutical company with strong global presence, diversified product portfolio, and leadership in generics and specialty drugs. Competitive advantage lies in scale, R&D capabilities, and established distribution networks worldwide.

📈 Entry Zone Recommendation: Current price (1,745 ₹) is near DMA 50 (1,746 ₹) and above DMA 200 (1,701 ₹), showing technical support. RSI at 42.8 indicates neutral momentum. Entry zone suggested between 1,600–1,700 ₹ for accumulation. Long-term holding is favorable given industry leadership, but valuation risks require cautious staggered buying.

Positive

• ✅ Strong ROE (17.8%) and ROCE (16.8%) reflect efficient capital use.
• ✅ Global leadership in generics and specialty pharmaceuticals.
• ✅ DII holdings increased (+0.74%), showing domestic institutional confidence.

Limitation

• ⚠️ High P/E (89.6) compared to industry average (30.6).
• ⚠️ P/B ratio ~17.6 indicates expensive valuations.
• ⚠️ Debt-to-equity at 0.56 is higher than ideal for pharma peers.

Company Negative News

• 📉 Quarterly PAT dropped from 927 Cr. to 564 Cr. (-32.7%).
• 📉 FII holdings decreased (-0.71%), showing reduced foreign investor confidence.

Company Positive News

• 📢 DII holdings increased (+0.74%), supporting domestic investor sentiment.
• 📢 Strong 52-week performance (+54.5%) highlights market confidence in long-term growth.

Industry

• 💊 Pharma sector benefits from global demand for generics and specialty drugs.
• 💊 Industry P/E at 30.6 suggests moderate valuations, making Sun Pharma’s premium noteworthy.

Conclusion

🔎 Sun Pharma remains a strong industry leader with global reach, diversified portfolio, and efficient capital returns. However, valuations are stretched, and recent profit decline raises caution. Best suited for long-term investors who can accumulate near 1,600–1,700 ₹ with staggered buying, expecting industry tailwinds and scale advantages to support future growth.

Would you like me to extend this into a peer benchmarking overlay comparing Sun Pharma with other top pharma stocks (like Cipla, Dr. Reddy’s, Divi’s Labs), or a sector rotation basket scan to identify better compounding opportunities in healthcare?