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Summary
of Contents
STOCK UPDATE
Lupin
Cluster: Apple
Green
Recommendation: Buy
Price target: Under
review
Current market price: Rs714
Q4FY2007 results:
first-cut analysis
Result
highlights
-
Lupin's net
sales increased by 22.8% year on year (yoy) to Rs518.1 crore in
Q4FY2007. The growth in the top line is above our expectations.
The sales growth was driven by a 12% rise in the domestic
formulation business to Rs144.3 crore and a 53.4% increase in the
formulation exports to Rs165.9 crore.
-
Having
launched six new products in the USA in FY2007, Lupin continues to
maintain a healthy double-digit market share for most of its
products. It has managed to grab a market share of 33% for
Lisinopril and that of 25% for Cefprozil tablets and suspension.
Further, Lupin's branded product in the US market, Suprax,
continues to do well. The product has seen a strong volume growth
with prescriptions exceeding 8,500 a week during the peak
season.
-
Lupin's
operating profit margin (OPM) expanded by 460 basis points yoy to
14.5% in Q4FY2007; the same was lower than our expectation of
15.7%. The OPM was below expectations on account of a higher than
anticipated rise in the company's raw material cost and higher
research and development (R&D) expenses. Consequently, the
company's operating profit grew by 80.0% yoy to Rs75.0 crore in
Q4FY2007.
-
The profit
before tax stood at Rs66.6 crore, a growth of 7.9% yoy. The same
was below our expectation of Rs74.2 crore. However, on including
the one-time income of Rs114.32 crore (euro 20 million) in
relation to the sale of the Perindopril patent to Laboratories
Servier of France, the reported net profit stood at Rs137.1 crore,
a growth of 173.1% yoy.
-
The company's
reported net profit stood at Rs137.1 crore, up by 173.1% yoy.
However, this includes the one-time income related to the sale of
the Perindopril patent. Based on our estimates, the net profit
excluding the post-tax consideration received from the sale of the
Perindopril patent stood at Rs61.3 crore, a jump of 22% yoy. The
same was above our estimate of Rs57.5 crore.
-
For FY2007,
the company's net sales increased by 22.7% to Rs1,970.9 crore,
which was above our estimates. The OPM expanded by 70 basis points
to 14.9% as against our estimate of 15.7%, driven largely by
higher R&D expenses. The company's reported net profit stood
at Rs302.1 crore, up by 65.3% yoy. However, this includes the
one-time income related to the sale of the Perindopril patent.
Based on our estimates, the net profit excluding the post-tax
consideration received from the sale of the Perindopril patent
stood at Rs226.2 crore, a jump of 23.8% yoy, and was in line with
our estimate of Rs228.4 crore.
-
The management
aims to increase its turnover from the current level of Rs2,000
crore to Rs3,000 crore in FY2008 (a 50% growth) through various
initiatives in the USA, Europe and semi-regulated markets. In
FY2009, the company plans for an additional 40% growth to $4,200
crore. This growth will largely come from organic initiatives,
with a small component of inorganic growth as well. Further,
Lupin's lead anti-migraine new chemical entity is currently in
Phase III trials; the management aims to monetise this molecule in
FY2008 and any news on this front will come as a positive earnings
surprise for the company.
-
Based on the
FY2007 performance and the outlook provided by the management at
the recently held analyst meet, we are in the process of upgrading
our numbers and will come out with an update shortly. At the
current market price of Rs714, Lupin is quoting at 18.9 its FY2008
fully diluted earnings.
Gateway Distriparks
Cluster: Cannonball
Recommendation:
Buy
Price target: Rs250
Current market price: Rs182
Results in line
with expectations
Result
highlights
-
Gateway
Distriparks Ltd's (GDL) revenues from the container business grew
by 24% year on year (yoy) to Rs41 crore in Q4FY2007. With Snowman
Frozen Foods, the cold chain subsidiary, contributing Rs6.65 crore
for the quarter, the total revenues for the quarter stood at Rs47
crore.
-
The operating
profit grew by 22% yoy to Rs22.6 crore whereas the operating
profit margin (OPM) declined by 840 basis points to 47.4%. Snowman
Frozen Foods continued to remain unprofitable at the earnings
before interest, tax, depreciation and amortisation (EBITDA)
level, registering a loss of Rs0.17 crore for the quarter.
-
The interest
cost decreased by 66% yoy to Rs0.20 crore, thanks to the repayment
of debt whereas the depreciation provision increased by 62.6% yoy
to Rs4.57 crore on account of higher capital expenditure (capex)
during the quarter.
-
The tax
provision stood at 17% as the company continued to enjoy the 80 IA
benefit for investment in inland container depots (ICDs). The net
profit increased by 8.5% yoy to Rs19.27 crore.
-
Last month,
GDL through its subsidiary GatewayRail had formed a 51:49 joint
venture with Container Corporation of India (Concor) to construct
and operate a rail-linked double-stack container terminal at
Garhi-Harsaru, 7 kilometre from Gurgaon in Haryana.
-
We are in the
process of revising our numbers and will update you soon on the
revised numbers. Meanwhile we maintain our Buy recommendation on
the stock with a price target of Rs250 per share.
VIEWPOINT
Patel
Engineering
Unlocking value of
land bank
We
attended the analyst meet of Patel Engineering Ltd (PEL) held on May
09, 2007 in Mumbai. Following are the key takeaways from the
meet.
Real estate
plans
-
For the first
time, the company unveiled its real estate plans and strategy for
its land bank.
-
The current
land bank stands at around 500 acre, located in four
places.
-
The important
thing about the company's land bank is that the entire land bank
is situated in urban areas and hence commands higher
realisation.
-
The company
has floated a wholly owned subsidiary called Patel Realty India
Ltd (PRIL) under which all its real estate activities will take
place.
MUTUAL FUNDS:
WHAT�S IN�WHAT�S OUT
Fund Analysis: May 2007
An analysis has been
undertaken on equity and mid-cap funds' portfolios, indicating the
favourite picks of fund managers for the month of April 2007. Equity
funds comprise all diversified, index, sector and tax planning
funds, whereas mid-cap funds include a universe of 18 funds such as
Reliance Growth, Franklin India Prima Fund, HDFC Capital Builder,
Birla Mid-cap Fund etc
.
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