Hold Lupin Ltd For Target Rs.1,015 - ICICI Direct
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Revenue driven by India, margins still below par…
About the stock: Lupin is a multinational pharma company engaged in manufacturing & marketing branded & generic formulations, APIs, biotech products as well as OTC medicines across multiple dosage forms & therapeutic categories.
* It is the third largest generic player (by prescriptions) in the US with 168 generic products (market leader: 52 products; Top 3: 122 products) along with being sixth largest company in the Indian pharmaceutical market
* The company is recently going through some rough patch especially on the US generics front due to plant compliance issues besides margins pressure
Q2FY22 Results: Lupin reported a mixed set of results with below-par margins.
* Sales were up 6.7% YoY to | 4091 crore
* EBITDA in Q2FY22 was at | 564 crore, down 3% YoY with margins at 14%
* Adjusted loss was at | 304 crore vs. profit of | 211 crore in Q2FY21
What should investors do? Lupin’s share price has de-grown by ~0.5x over the past five years (from ~| 1739 in July 2016 to ~| 882 levels in October 2021).
* We retain HOLD rating on the stock as the headwinds persist
Target Price and Valuation: We value Lupin at | 1015 on SOTP basis
Key triggers for future price performance:
* Resolving regulatory challenges and speeding up the approvals and launches from pipeline
* Lupin plans to strengthen the biosimilars portfolio across, especially in EU and the US apart from continued respiratory traction in the US
* Its tie-ups with Eli Lilly, Boehringer for anti-diabetics and with MSD for pneumonia vaccines will help bolster domestic franchise
* Progress on the margins front
Alternate Stock Idea: Apart from Lupin, in our healthcare coverage we like Cipla.
* Cipla is a global pharma company with over 1,500+ products in 65 therapeutic categories, with over 50 dosage forms
* BUY with a target price of | 1085
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