Brokers' call: Sun Pharma remains a buy

Morgan Stanley has maintained a ‘Buy’ rating on Sun Pharmaceuticals with an ‘Overweight’ rating with a target price of Rs 1,159. Sun is transforming its top-quality generic business into a specialty company. “We believe it can unlock meaningful value from URL, DUSA, SPARC and its own portfolio in the next few years.

We expect 21% EPS CAGR for F13-15, raise our PT to Rs 1,159 (25x F15e EPS),” Morgan Stanley said in a report. The ‘Buy’ rating is in view of the growth visibility detailed above, the potential to unlock value in the balance sheet ($1.2b net cash) and the company’s capability to manage complex technologies. “We argue for premium valuations for Sun in view of its sustainable competitive advantages (i.e., technical capabilities and an end-to-end business model), global generic opportunities and proven track record of high growth/ROE,” the report said.