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Lupin Ltd Research Report - 21st Jan 2016

Pharmaceutical | Published on Nov 10th 2015

IT

For 2QFY2016, Lupin posted a poor set of numbers, with the OPM coming in lower than expected, and consequently the net profit as well. The company posted a 2.0% growth in sales to Rs3,178cr V/s Rs3,272cr estimated, mainly driven by the European markets. On the operating front, the Gross margin came in at 64.5% V/s 65.7% expected. Further, a 19.4% yoy and 36.2% yoy rise in the Staff cost and R&D expenditure led the OPM to come in at 16.6% V/s 24.6% expected and V/s 24.9% in 2QFY2015. Thus, the net profit came in at Rs408.5cr V/s Rs578.6cr expected and V/s Rs630.0cr in 2QFY2015, a yoy dip of 35.1%. We maintain our Neutral stance on the stock. Below expectation numbers: The company posted a 2.0% yoy growth in sales to Rs3,178cr V/s Rs3,272cr estimated, mainly driven by European markets. Its key market US (Rs1,155cr), posted a dip of 9.2% yoy, on account of slow pace of approvals. The company launched 4 products in the US during the period. The company expects US sales to get normalized by 4QFY2016. Other key markets: India, Europe, Japan, South Africa and ROW, posted a growth of 9.4%, 32.2%, - 6.5%, -5.6% and 52.9% yoy, respectively. On the operating front, the Gross margin came in at 64.5% V/s 65.7% expected. Further, a 19.4% and 36.2% rise in Staff cost and R&D expenditure led the OPM to come in at 16.6% V/s 24.6% expected and V/s 24.9% in 2QFY2015. Thus, the net profit came in at Rs408.5cr V/s Rs578.6cr expected and V/s Rs630.0cr in 2QFY2015, a yoy dip of 35.1%. Outlook and valuation: We expect Lupin to post a CAGR of 14.6% in net sales to Rs16,561cr and earnings to report a 13.1% CAGR to Rs68.3/share over FY2015–17E. Currently, the stock is trading at 36.8x and 27.1x its FY2016E and FY2017E earnings, respectively. We remain Neutral on the stock.

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CMP 1,838
Target Price
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)69,352.46
MCAP NSE (Rs in Cr)69,318.61
P/E (x)24.58
EPS (Rs.)62.52
BV (Rs.)295.11
Div Yield (%)0.49
FV (Rs.)2.00
P/BV (x)5.55
EV/Sales (x)5.36
EV/EBITDA (x)23.22

Shareholding Pattern (%)

Promoter47.0
Foreign35.0
Public & Others10.0
Institution7.0
Corporate1.0
Grand Total100.0

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