Sun Pharma Ransomware Attack: Analysts' Take On Impact

Analysts expect a short-term impact on revenues and operations of Sun Pharmaceutical Industries Ltd., following a ransomware group's attack on the company's information technology assets.However, they do not see any change in the structural story and continue to hold their recommendations on the stock with no immediate downgrades.In a disclosure on Sunday, Sun Pharma said that a ransomware group took credit for the information security incident that occurred on March 2, and consequently, some revenues were expected to be impacted.Analysts expect the impact to be a one-off. Do not expect a revenue impact of more than 2-3%, Abdulkader Puranwala, pharma analyst with Elara Capital Plc. told BQ Prime. The impact may be seen in the first quarter of FY24. They are not downgrading the stock from their current "accumulate". The ransomware attack may impact revenues in the near term, according to Sriraam Rathi, India analyst, pharma and healthcare, BNP Paribas India Solutions Pvt. Fourth quarter might see lower revenues, while impact on the first quarter of FY24 revenues would depend on the speed of remediation. However, he expects the long term story to remain intact. "There is no structural change in the business. We continue to have Sun Pharma as our top pick while maintaining buy rating."Vishal Manchanda, pharma analyst, Systematix Securities, seconded that there is no long-term structural impact. He expects this incident to cause a temporary disruption in the sales and manufacturing operations, which could impact revenues in Q4. In case of supply constraint, the company may also have to face some penalties in the US, he said. "But overall this does not impact their 'buy' rating on the stock." It is difficult to comment on the impact unless there is more information. "However, it does not merit any downgrade just yet", according to Aditya Khemka, fund manager, InCred PMS Healthcare.Rahul Jeewani, pharma analyst, IIFL Securities, also does not expect any material impact due to the incident. IIFL Securities currently has a 'buy' recommendation on the stock and it is one of their top picks.The company in its exchange disclosure had said that "revenues are expected to be reduced in some of our businesses" and it "would incur expenses in connection with the incident and the remediation". Any other potential adverse impact of the incident is yet to be determined, it said in the filing. It could increase costs to maintain insurance coverage, divert the time of the management and employees, and lead to the possibility of litigation.Queries sent on mail to Sun Pharma around the company's existing cyber insurance coverage for the incident; quantification of revenue and expense impact; impact on operations; progress on weeding out hackers from the system and an update on the claims made by the attacker with regards to sensitive data, remained unanswered.Recently, Credit Suisse in its March 24 report, upgraded Sun Pharma's rating from 'neutral' to 'outperform'.Shares of Sun Pharma were trading 1.62% higher, as of 12:24 p.m., while the benchmark Sensex gained 0.65%.Of the 44 analysts tracking the company, 40 have a 'buy' rating, three suggest a 'hold,' and one recommends a 'sell,' according to Bloomberg data. The 12-month consensus price target implies an upside of 17.7%.

Sun Pharma Ransomware Attack: Analysts' Take On Impact

Analysts don't see change in the structural story and continue to hold their recommendations on the stock.

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