The fall in share price of Sun Pharmaceutical Industries, following a warning letter from the US Food and Drug Administration (FDA, has hardly rattled analysts tracking the drug-maker. Intra-day, the stock tanked 7.5 per cent on the NSE.

Adverse impact The warning is important as the Halol facility accounts for close to 10 per cent of Sun Pharma’s consolidated sales, and also from the point of view of its injectable fillings expected to be launched from FY20. Further, regulatory trouble at Halol in the past 15 months has already had an adverse impact on the company’s financial performance.

“Halol has been hurting the company’s numbers since Q3FY15, with the management clarifying that its contribution to consolidated revenues currently was in high-single digits for FY15,” said Kotak Institutional Equities.

The big relief here is that the company is more dependent on Taro, which has a high operating profit margin of around 60 per cent, for profitability of the US business.

The management has maintained FY16 sales and profit guidance. But analysts estimate that any import alert, though the probability is low, will take off at least 10 per cent of FY17 earnings.

Analysts have for the time being cut their earnings estimates by 3-6 per cent for FY16-18 following the delay of three to six months in finding a solution to the Halol facility issue.

Based on the average estimated target price, the stock has potential to provide returns of over 11 per cent from Monday’s closing price of ₹756.2 on the NSE.

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