Add Lupin Ltd. target Rs 815: ICICI Direct

ICICI Direct has an add call on Lupin Ltd. with a target price of Rs 815. The current market price of Lupin Ltd. is Rs 760.95. Time period given by the brokerage is a year when Lupin Ltd. price can reach the defined target.

Investment rational by ICICI Direct

Lupin Ltd., incorporated in the year 1983, is a large-cap pharma & healthcare company with a market cap of Rs 34665 crore.


Lupin reported Q4FY18 performance largely in line with our estimates, although margin fell short. Revenue declined 5.2% YoY to Rs40.3bn (I-Sec est. Rs38.9bn) due to continued pricing and competitive pressure in US. However, US revenue improved sequentially on new launches. Gross margin declined 570bps YoY due to weak US performance but improved sequentially 150bps. Owing to lower gross margin, increased SG&A expenses on building branded pipeline and remediation costs for warning letter, EBITDA margin dropped 440bps YoY to 17.6% (I-Sec est. 19.3%) and remained stable QoQ. Adj. PAT declined 27.6% YoY to Rs3.6bn led by impairment of Rs14.6bn on certain underperforming molecules from the acquired Gavis assets. The management expects revenue growth and EBITDA margin to improve from current levels in coming quarters as US revenue seems to have bottomed out in FY18 and mid-teens growth in India business. However, considering recent correction in stock price of ~10%, we upgrade the stock to ADD from Hold.