Maintain Buy on Lupin - Motilal Oswal

Lupin (LPC IN; Mkt Cap USD4.1b, CMP Rs420, Buy)

Net sales grew 17% YoY to Rs14.7b (v/s our estimate of Rs14.7b), EBITDA grew 10% YoY to Rs2.7b (v/s our estimate of Rs2.75b) while PAT grew 39.5% YoY.

Topline growth was led by 24% growth in formulations revenues in emerging markets (India up 16% and emerging markets up 58%) and 16% growth in Japan.

Reported EBITDA included Rs170m of MTM forex losses. Adjusted for this, EBITDA was Rs2.71b, in line at Rs2.75b. EBITDA margin was 18.5%.

PAT at Rs2.24b was slightly higher than our estimate of Rs2.14b, despite in-line EBITDA, due to higher other income and lower taxes.

Lupin is likely to witness gradual improvement in underlying fundamentals, led by an expanding US generics pipeline, niche/Para-IV opportunities in the US.

The company continues to target niche, low-competition opportunities to drive future growth and improve profitability. Its initiatives in the US oral contraceptives space are an effort in this direction. The stock trades at 21.3x FY11E, 18.5x FY12E and 17.2x FY13E EPS, with a sustained RoE of 25-30%. We expect muted bottomline growth in 4QFY11 due to the significantly high base of last year. We maintain Buy with a target price of Rs490 (20x FY13E EPS).

Source : Equity Bulls

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