"With the recent run up in the stock, we believe most upsides from Halol clearance and specialty pipeline are already baked in the price. Hence, we believe the risk-reward is not favorable; moreover, we see limited upside from current level. Therefore, we downgrade to 'HOLD/SU' from 'BUY/SO' with target price of Rs 550," said Edelweiss in its report.
At the same time, Motilal Oswal maintains 'buy' rating. "We expect the stock to remain under pressure in the near term due to challenges related to growth and margins. We maintain Buy rating with a target price of Rs 675," said Motilal Oswal in a report.
The drugmaker has also struggled as some of its products were banned from sale in the United States because the factories that made them did not meet US quality standards. It was also hit by adjustments for US tax reforms in the third quarter.
While underlining the key risk of Sun Pharma, the brokerage house said, "Potential price correction in select derma products of Taro franchise could result in loss of Taro's business, which will impact the margins of the business and earnings growth."
Its net profit of Rs 3.65 billion ($57 million) for the October-December quarter was its smallest profit in over two and a half years, and well below analysts forecasts of 9.12 billion rupees in a Reuters poll.
The company said its US sales slumped 35 percent to $328 million in the quarter, hurt by lower sales of generic versions of cancer drug imatinib and olmesartan, which is used in the treatment of high blood pressure.
US sales accounted for nearly a third of the company's total sales, which fell 14 percent to Rs 65.9 billion. The company said its profit was also hit by a one-off deferred tax adjustment of Rs 5.13 billion on account of tax reforms in the United States.