Technology

For 1QFY2017, the company posted better than expected numbers. Sales came
in at Rs4,316cr V/s Rs4,150cr expected and V/s Rs3,081cr in 1QFY2016, a yoy
growth of 40.1%. The sales growth came on the back of the US market which
posted a yoy revenue growth of 82.3% to Rs2,188.6cr. On the operating front, the
EBITDA margin came in at 27.4% V/s 29.3% expected and V/s 24.3% in
1QFY2016. Expansion in OPM, low taxation and higher other income aided the
Adj. net profit to come in at Rs882cr V/s Rs777cr expected and V/s Rs569cr in
1QFY2016, ie a yoy growth of 55.1%. We maintain our accumulate rating.
Numbers outperform our expectations: For 1QFY2017, the company posted
better than expected numbers. Sales came in at Rs4,316cr V/s Rs4,150cr expected
and V/s Rs3,081cr in 1QFY2016, a yoy growth of 40.1%. The sales growth came
on the back of the US market which posted a yoy revenue growth of 82.3% to
Rs2,188.6cr. On the operating front, the EBITDA margin came in at 27.4% V/s
29.3% expected and V/s 24.3% in 1QFY2016. Although the margin expanded
on a yoy basis, it underperformed our expectations owing to a 45.2% yoy
increase in employee cost and an 104.8% rise in R&D expenses (11.6% of sales
in 1QFY2017 V/s 7.9% of sales 1QFY2016). The Adj. net profit came in at
Rs882cr V/s Rs777cr expected and V/s Rs569cr in 1QFY2016, ie a yoy growth of
55.1%, led by expansion in operating margin, low taxation, and higher other
income.
Outlook and valuation: We expect Lupin to post a net sales CAGR of 16.7% to
Rs18,644cr and earnings CAGR of 17.2% to Rs69.3/share over FY2016–18E.
Currently, the stock is trading at 22.8x its FY2018E earnings, respectively. We
recommend a accumulate rating on the stock.

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