Lupin - Thread
RAJESH DESAI
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CA. Rajesh Desai
Rajesh Desai
LUPIN : mgt says may spend as much as $1bn on deal to buy brands in US.. may buy pediatric brand in US, generics firm in Brazil
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CA. Rajesh Desai
Rajesh Desai
Lupin - Sharekhan
Recommendation: Buy
Price target: Rs978
Current market price: Rs902
Price target revised up to Rs978; Buy maintained
Result highlights
Q2 results better than expected: Lupin reported a 17.5% year-on-year (Y-o-Y) growth in the net sales to Rs2,631.50 crore on account of a strong revenue growth in the USA and the active pharmaceutical ingredients (API) business. The operating profit margin (OPM) improved by 338 basis points year on year (YoY) to 23.7% on account of a better product mix and currency benefit. A sharp reduction in the interest costs and depreciation helped record a 53% Y-o-Y rise in profit before tax (PBT) to Rs675 crore. The net profit jumped by 39.8% YoY to Rs406.2 crore during the quarter. The company has net foreign exchange (forex) gains of Rs4 crore (included in the net profit) as compared with Rs30 crore in Q2FY2013. The net profit got reduced by the exceptional expenses of Rs51.30 crore (tax on dividend received from subsidiaries, which would be adjusted against the company's dividend distribution tax liability) in Q2FY2014. Excluding the exceptional tax payments, the adjusted net profit grew by 57.5% YoY to Rs457 crore during the quarter. The operating performance during the quarter has been marginally better than our as well as the Street's expectations.
Most of the geographies record strong growth; slower growth in India and Japan: During the quarter, the revenues from the US business grew by 32.4% YoY (though the branded business in the USA witnessed a 54% Y-o-Y decline in the dollar terms), while the European market reported an 18.4% Y-o-Y growth to Rs74 crore. Lupin's South African business grew by 24% YoY while rest of the emerging markets recorded an 18% Y-o-Y rise in the revenues during the quarter. However, the revenues from the Indian market grew at a slower rate of 9% due to the impact of the new pricing policy. Its Japanese business recorded a slower growth of 3% YoY in local currency terms.
Outlook remains strong; price target revised up to Rs978: We expect a stronger performance going forward on account of (1) new products launches in the US market in the niche segments; (2) a better performance in the branded business in the USA on account of the launch of additional dose strength of Antara brand and a better traction in the newly launched products like Alinia and Locoid cream; (3) impact of the new pricing policy and trade issues settling down in subsequent quarters; (4) continued growth momentum in the emerging markets; and (5) an improvement in the OPM on account of a better product mix and the rupee realisation. We have fine-tuned our earnings estimates for FY2014 and FY2015 in light of the better earnings visibility. We have revised our price target up by 8% to Rs978 (implies 21x FY2015E earnings) but maintain our Buy recommendation on the stock.
CA. Rajesh Desai