Lupin remains a ‘sell’ on Q4 miss; Target prices cut

Brokerages maintained their ‘sell’ rating on Lupin and cut target prices by 3-14 per cent as its fourth quarter profit missed Street estimates. The drugmaker on Wednesday reported a consolidated profit after tax of Rs 296.4 crore for the March quarter compared to consolidated net loss of Rs 777.6 crore for the same period a year ago. Analysts said that Lupin’s fourth quarter performance was below estimates due to lower-than-expected US revenue and higher tax outgo. “A turnaround in operations is still some time away, depending on timely approvals and resolution of US compliance issues. We cut FY20-21 EPS by 6-14 per cent on higher tax rate guidance,” said CLSA, lowering target price to Rs 700 from Rs 730 and retaining sell rating. According to Jefferies, earnings recovery is largely reliant on a few key products and is mostly back-ended, which would mean that risk to earnings is still high.

“LPC’s base business is facing challenges. It is, in our view, trailing peers in building a complex generic pipeline. Its R&D execution has been weak, raising concerns about mediumterm growth,” said Jefferies. Warning letters at its key facilities remain an overhang, it added. Jefferies has cut target price by 4.4 per cent to Rs 650 and maintained underperform rating. Citigroup and Elara have maintained sell rating and Antique has reiterated its hold rating. Kotak Institutional Equities, however, has upgraded Lupin to add from reduce, citing reasonable valuations.