Moneycontrol Bureau
Shares of Lupin have climbed 4.2 percent in early trade Thursday. Brokerage Credit Suisse has upgraded stock to outperform from neutral, betting on its diabetes drugs. It has raised target price by 27 percent to Rs 2,250 from Rs 1,770.
"Upside potential from diabetes drugs Fortamet and Glumetza generics appears high and FY17 earnings per share growth should be strong at 70 percent. In addition, FY17 growth is also supported by launch of key products in the US (Renagel, Renvela, Welchol, Nexium)," Credit Suisse reasons.
Lupin has taken 200 percent price increase in Fortamet, according to Price Rx. The brokerage says it has been highlighting this opportunity for Lupin after a 8 times price increase in competing product Glumetza.
It feels large part of price increase should sustain as Fortamet is a low competition product (two generics); lower price Glucophage XR generics does not have 1000mg strength; and post price increase, Fortamet is still 75 percent cheaper than Glumetza.
Credit Suisse has currently built only half of the price increase (in target price) as it feels the No. 2 player Actavis is yet to hike prices, Mylan can launch generic Fortamet, and Fortamet is genericised & can have additional competition.This follows Nomura's upgrade on Wednesday. Nomura has raised it to a buy from neutral rating as it expects approvals of high impact products to drive earnings from Q4FY16 onwards.
The brokerage has also raised target price to Rs 2,149, an potential upside of 14.3 percent. Significant value-accretive acquisitions and visibility to sustain growth by moving up the complexity levels (inhalers and biosimilars) could justify a higher valuation multiple, it feels.Nomura has cut its earnings estimates by 7 percent for FY16, but raised by 21 percent for FY17.
At 09:29 hours IST, the scrip of Lupin was quoting at Rs 1,984.20, up Rs 62.90, or 3.27 percent on the Bombay Stock Exchange.Posted by Sunil Shankar Matkar
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
