ICICI Direct recommended hold rating on Lupin with a target price of Rs 930 in its research report dated May 31, 2020.
ICICI Direct's research report on Lupin
Q4FY20 revenues declined 12.7% YoY to Rs 3845.7 crore (I-direct estimate: Rs 3715 crore) mainly due to Kyowa divestment and due to 9.3% YoY decline in US revenues to Rs 1579.1 crore (I-direct estimate: Rs 1483 crore). Domestic formulations grew 13.3% YoY to Rs 1192.1 crore (I-direct estimate: Rs 1137 crore). EBITDA margins contracted 614 bps YoY to 13.7% (I-direct estimate: 13.2%) due to lower gross margins and higher employee cost. EBITDA de-grew 39.8% YoY to Rs 526.3 crore (I-direct estimate: Rs 489 crore). Exceptional items include profit on Kyowa Pharma divestment of Rs 121 crore, loss on Kyowa Criticare divestment of Rs 28.4 crore and intangible impairment of Rs 9.6 crore. Adjusted net profit was at Rs 335.6 crore, up 16.4% YoY vs. Rs 288.4 crore in Q4FY19.
However, the resolution of warning letter and clearance of official action indicated (OAIs) status on plants could be a near term overhang along with progress on the margins front. Like other pharma majors, Lupin has also chalked out product and cost rationalisation drive. The result of this drive could be visible two to three years down the line. We arrive at our target price of Rs 930 based on 24x FY22E EPS of Rs 38.7.
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