Sun Pharma Staart 8-10% Winstr risk in the midst of 100% Trump rates, says HSBC. Can the giant navigate this?

The decision of the US government to impose a rate of 100% on imported patented medicines from 1 October could weigh on Sun Pharmaceutical Industries, the only major Indian drugstore with considerable exposure to innovative therapies in the US, HSBC said in a report of 26 September.

The rate, which excludes companies that build factories in the US, does not apply to generic medicines. For Sun Pharma, patented medicines accounted for around 17% of his turnover in FY25, which translated into around $ 1,217 million in consolidated sales.

Of these, around 85-90% – almost $ 1.1 billion – came from the American market. HSBC estimates that the rate in a worst-case scenario could be shaved 8-10% on the income of Sun Pharma in FY26 and FY27. Despite the potential risk, the brokerage has maintained its ‘buy’ rating on the shares with a target price of RS 1,850, which implies around 17% on the last closure of RS 1,627 on the NSE.

Although the new trade measure is expected to have a minimal impact on Indian pharmaceutical companies aimed at generic medicines, the growing dependence on Sun Pharma of the patented portfolio – is expected to rise from 17% of the turnover in FY25 to around 22% by FY28 – the vulnerable.

The innovative portfolio of the company, led by Ilumya, Cequa, Winlevi and Leqselvi, is an important growth motor. According to HSBC, the sale of patented products in the US grew with a compound annual rate of 19.2% between FY25 and FY28.

Sun Pharma is currently highly dependent on global contract development and production organizations (CDMOs) to produce its patented medicines. Ilumya, which is good for 56% of his patented turnover, is made in South Korea and Europe. To bypass the rate, the company could move production to CDMOs with American facilities, move production to its three existing American factories or acquire a local facility. With a cash balance of more than $ 3 billion from June 2025, Sun has the financial flexibility to implement such measures. HSBC, however, warns that moving the production or re-spending of factories can take 6-24 months and entails considerable costs. Despite the tariff risk, HSBC expects the turnover of Sun Pharma to continue to grow steadily, with its innovative medicine portfolio that plays a crucial role.

Although the rate is a headline risk, the income impact can be included, depending on the mitigation steps of the company, according to the brokerage. Generic medicines, which form about 90% of the prescribed volumes in the US, remain exempt from the rates for the time being. HSBC is of the opinion that the risk of similar tasks on generic medicines is low, given their interests for American healthcare costs and the dominance of Indian suppliers.

Sun Pharma shares ended in RS 1,585, lower with 2.6% compared to the last closure of the NSE. The shares of the company fell by 16% on an annual basis.

(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)