Angel Broking recommends Accumulate on Lupin with a Target Price of Rs 1,007 (12 months)

For 3QFY2014, Lupin's results came just in line with our expectations on the top-line front, while the OPM and net profit came much above expectations. The company posted sales of Rs. 2,983cr, posting a yoy growth of 21.0%. Its OPM expanded by 151bp yoy during the period to 24.6% vs our expectation of 23.4%. Thus, the net profit came in at Rs. 476cr (vs an expected Rs. 425cr), posting a yoy growth of 42.0%. We recommend an Accumulate rating on the stock with a price target of Rs. 1,007.

Better-than-expected net profit growth: Lupin's results came just in line with our expectations on the top-line front, while the OPM and net profit came much above our expectations. On the sales front, the company posted sales of Rs. 2,983cr, posting a yoy growth of 21.0%. The growth was predominantly led by the exports formulation business, which grew by 23% yoy, while domestic formulations grew by 14% yoy. The company's OPM expanded by 151bp yoy during the period to 24.6% (vs our expectation of 23.4%). This along with reduction in interest expenses aided the PBT to register a yoy growth of 33.0% to Rs. 738cr. Thus, the net profit came in at Rs. 476cr (vs an expected Rs. 425cr), posting a yoy growth of 42.0%.

Outlook and valuation: We expect Lupin's net sales to post a 26.6% CAGR to Rs. 13,855cr and earnings to report a 28.9% CAGR to Rs. 48.8/share over FY2013-15E. Currently, the stock is trading at 23.1x and 18.9x FY2014E and FY2015E earnings, respectively. We recommend an Accumulate on the stock.

Source : Equity Bulls

Keywords