MUMBAI: Pharmaceutical sector analysts are positive that theSun Pharma-Ranbaxy Labs combined entity stands to reap major benefits for the shareholders and most have either upgraded the Sun Pharma stock or have continued their ratings. Most analysts, however, are cautious on how Ranbaxy’s messy affairs with the global pharma regulators will be solved.
Bank of America Merrill Lynch on Monday upgraded Sun Phrama to buy with a price target of Rs 680, a rise of about 17% from the current closing of Rs 587. “While the deal will be earnings dilutive in the near term, we see significant synergies over the next 3-4 years which we believe will lead to 10-12% incremental EPS in year 3 from the acquisition,” BofA-ML analysts Manoj Garg wrote in his note to clients.
Edelweiss views the merger as a positive for Sun Pharma shareholders because of the complementary businesses of the two, Ranbaxy’s depressed profitability and valuations. “Given Sun Pharma’s track record of successfully turning around businesses, we believe it could harness Ranbaxy’s existing capabilities, geographical presence and product portfolio to improve the latter’s profitability,” a note from Edelweiss said.