Lupin - Robust PAT growth despite higher tax rate, R&D costs - CSEC Research

- Sales at INR 22.2bn grew 44% y-o-y driven by US generics, domestic formulations, Japan sales

- US, Domestic formulations and merger of l'rom Pharma with Kyowa, Japan, led sales increase

- EBITDA margins grew 154 bps y-o-y to 20.3% despite high R&D costs

- Robust PAT growth of 33% to INR 2.8bn driven by higher formulations in spite of higher tax rate

- R&D spend to stabilise at around 7% of sales

Valuation: Given the strong product pipeline, growth across markets, FY12-14E EPS CAGR of 28%, high growth, ROE ~ 25%, negligible debt, we assign a target P/E of 21X on consensus FY14E, arriving at a target price of INR 670. We recommend a BUY

Risks: Price controls in India in India could be short term dampener, higher price erosion in generics.

Source : Equity Bulls

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