Mumbai: Positive commentary by leading brokerages Credit Suisse and Nomura helped shares of pharma major Lupin end up nearly 3 per cent at Rs 732.95 on Monday.Credit Suisse upgraded the stock to outperform from underperform and raised the target price to Rs 860 from Rs 800.
The brokerage said its concerns on specialty drug Solosec have played out and it is upgrading the stock as it is now ignoring the sharp increase in free cash flow and strong opportunities such as generic Enbrel in Europe and generic Spiriva inhaler in the US.Lupin turned net debt in past four years due to weak acquisitions (Gavis, Solosec) and low FCF.
However, Lupin can be close to debt free by FY23 with margin expansion from (1) Levo, albuterol, Solosec in FY21, (2) gEnbrel, said Credit Suisse.Nomura has maintained a buy rating on Lupin with a target price of Rs 1,017.
The brokerage expects consolidation in pharma to continue.ET had reported last week that Lupin is in early discussions to buy JB Chemicals promoters 55 per cent stake in the company.We expect this trend of consolidation to continue as domestic market growth remains challenging with limited scope for new product introductions (consequence of patent regime and tougher regulatory standards) and governments price control action.
For Lupin, we see strategic rationale in acquiring JB as it is likely to complement LPC (Lupin)s presence, particularly in India, and there is scope for significant frontend synergies across markets," said Nomura.