INSUBCONTINENT EXCLUSIVE:
HDFC Securities has a buy call on Lupin with a target price of Rs 985.
The current market price of Lupin is Rs 818.15.
Time period given by
the brokerage is one year when Lupin price can reach the defined target
Investment rationale by the brokerage: While the first half of the current fiscal year was weak for Lupin, the company reported decent
revenue growth in the third quarter (up 8 per cent YoY), despite a delayed onset of the flu season in the US
On the margins front, we saw the impact of a lower gross margin and higher specialty spend weigh in on profitability
We anticipate the fourth quarter to be stronger for Lupin, owing to gRanexa launch and increased intensity in the flu season
Going ahead, commercialisation of the complex generics pipeline (Levothyroxine, gProair and bEnbrel), supported by 20 other ANDA launches
should enable nearly 12 per cent CAGR top line growth over FY19-21E
Moreover, specialty spend will get absorbed on the back of traction gained in Solosec, driving the profitability 300-400bps higher
Although the recovery in the US business and regulatory resolution at the Goa/Indore plants remain the key drivers for improvement in
operational performance, the robust branded franchise (valued at nearly Rs 650) provides a strong cushion at the current market price
We continue to maintain our BUY rating with a target price of Rs 985 (22x Dec-20E EPS).
