SUNPHARMA - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.7
| Stock Code | SUNPHARMA | Market Cap | 4,08,679 Cr. | Current Price | 1,704 ₹ | High / Low | 1,851 ₹ |
| Stock P/E | 93.7 | Book Value | 99.2 ₹ | Dividend Yield | 0.94 % | ROCE | 16.8 % |
| ROE | 17.8 % | Face Value | 1.00 ₹ | DMA 50 | 1,697 ₹ | DMA 200 | 1,697 ₹ |
| Chg in FII Hold | -0.43 % | Chg in DII Hold | 0.60 % | PAT Qtr | 872 Cr. | PAT Prev Qtr | 564 Cr. |
| RSI | 55.5 | MACD | -21.7 | Volume | 46,48,701 | Avg Vol 1Wk | 47,98,138 |
| Low price | 1,547 ₹ | High price | 1,851 ₹ | PEG Ratio | 1.28 | Debt to equity | 0.56 |
| 52w Index | 51.6 % | Qtr Profit Var | -24.6 % | EPS | 16.7 ₹ | Industry PE | 29.1 |
📊 Analysis: SUNPHARMA demonstrates strong profitability metrics with ROE at 17.8% and ROCE at 16.8%, making it a fundamentally sound company. However, the stock trades at a very high P/E of 93.7 compared to the industry average of 29.1, suggesting significant overvaluation. The PEG ratio of 1.28 indicates growth is priced at a premium. Dividend yield of 0.94% provides limited passive income. Technical support lies around 1,550–1,600 ₹, with resistance near 1,800–1,850 ₹. The ideal entry zone is 1,550–1,600 ₹ for margin of safety. For existing holders, a long-term horizon is viable, but partial profit booking near 1,800–1,850 ₹ resistance is advisable unless earnings growth accelerates.
✅ Positive
- Large market cap of 4,08,679 Cr. ensures stability and leadership in pharma.
- Strong ROE (17.8%) and ROCE (16.8%) support efficient capital use.
- Debt-to-equity ratio of 0.56 indicates manageable leverage.
- DII holdings increased by 0.60%, showing domestic investor confidence.
- Quarterly PAT improved sequentially (872 Cr. vs 564 Cr.).
⚠️ Limitation
- High P/E (93.7) compared to industry average (29.1) signals overvaluation.
- Dividend yield of 0.94% is modest.
- PEG ratio of 1.28 suggests growth is priced at a premium.
- FII holdings decreased by -0.43%, showing reduced foreign confidence.
📉 Company Negative News
- Quarterly profit variation at -24.6% indicates earnings volatility.
- Weak EPS (16.7 ₹) relative to high valuation.
📈 Company Positive News
- Sequential PAT growth shows operational recovery.
- Strong fundamentals with double-digit ROE and ROCE.
- Domestic institutional investors increasing stake.
🏭 Industry
- Pharmaceutical sector has long-term demand drivers: healthcare expansion, generics, and specialty drugs.
- Industry P/E at 29.1 suggests SUNPHARMA trades at a steep premium.
- Structural drivers: aging population, rising healthcare spending, and global demand for generics.
🔎 Conclusion
SUNPHARMA earns a rating of 3.7 due to strong ROE/ROCE but expensive valuations. Long-term investors should only consider entry in the 1,550–1,600 ₹ zone for margin of safety. Current holders may adopt a long-term horizon, with partial profit booking near 1,800–1,850 ₹ resistance unless earnings growth improves. The stock remains a strong pharma play but requires caution due to valuation risks.