Buy Lupin; target of Rs 1868: Sharekhan

Sharekhan's research report on Lupin

Lupin reported a mix set of earnings where sales were 4% below our estimates at Rs. 4,895 crore. EBITDA was 4% below our estimates at Rs. 997 crore, while adjusted PAT was in-line with our estimate of Rs. 561 crore. A healthy product mix led by 80% growth from non-oral solids in the U.S. resulted in 67.8% gross margin, which was offset by higher R&D expense resulting in 20.1% EBITDA margin in 4QFY2024. U.S. sales in CC terms were at US$209mn, which was 4% lower than our estimate due to a decline in seasonal products, but it was offset by the launch of new products like Tiotropium and Prolensa.

Outlook

The company has guided for above 20% EBITDA margin, led by a healthy pipeline of complex generics and specialty products; hence, we maintain our BUY rating on the stock. At the CMP, the stock trades at 31.8x and 26.8x its FY2025E and FY2026E PE and as 70% of the product pipeline in non-oral solids. We maintain our PT at Rs. 1,868 (ascribing 31x its FY2026 P/E).