Oct 26, 2012, 01.40 PM IST | Source: Moneycontrol.com

Accumulate Lupin; target of Rs 620: Dolat Capital

Dolat Capital is bullish on Lupin and has recommended accumulate rating on the stock with a target of Rs 620 in its October 25 research report.

Dolat Capital is bullish on Lupin and has recommended accumulate rating on the stock with a target of Rs 620 in its October 25 research report.

“Lupin’s revenue grew a 29.9% YoY to Rs 23.01bn with healthy growth recorded across geographies; US and Japan in particular. Lower contribution by API business (11% to the topline) resulted in better product mix. Domestic formulations grew 18.4% YoY to Rs 6.06bn. Management has maintained growth guidance of 20% for FY13E. Export formulations to advanced markets (US, EU and Japan) grew 50.3% YoY to Rs 11.66bn, primarily driven by US and Japan. US (ex Medicis IP income) grew 40.1% YoY to Rs 7.73bn (18% in constant currency). Japan grew 85.4% YoY to Rs 3.3bn (55% in constant currency), driven by consolidation of I’rom Pharma. Growth excluding I’rom was 31% YoY (10% in constant currency).”

“Operating margins declined by 30bps YoY to 22.4% aided by lower other expenses (down 480bps YoY). This was primarily due to 370bps fall in R&D expenses. Increase in raw material costs (up 490bps), employee expenses (up 20bps YoY) and an unrealized loss of Rs 250mn restricted further margin expansion. Tax rate stood significantly higher at 32.6% against 21.6% in Q2FY12 due to absence of EoU benefits. Consequently, reported PAT grew 8.8% YoY to Rs 2.9bn. Lupin maintains its target to launch 20 products in the US this year which includes 9-10 OCs and two controlled substances. Key launches include gTricor, gGlumetza, gYasmin and gSeasonique. Timely approvals will be the key for growth. We see near term growth triggers to be in place.”

“Lupin continues to seek high-potential, low-risk acquisitions in key markets. This will further complement its organic growth momentum. We expect Lupin to register earnings CAGR of 26% over FY12-14E. At CMP, the stock trades at 22.1x FY13E and 18.2x FY14E earnings. We maintain our accumulate rating on the stock with a target price of Rs 620 (20x FY14E EPS),” says Dolat Capital research report.

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