Recommendation: Buy
CMP = Rs 515
Price target: Rs 840
Result highlights:
- Lupin's consolidated revenues increased by 43.8% year on year (yoy) to Rs 721.3 crore in Q3FY2008. The growth in the top line was above our expectations and was driven by a 25.3% growth in the domestic formulation business, an appreciable 169.8% jump in the export of formulations to advanced markets and the consolidation of the recent acquisitions.
- Excluding the impact of the acquisitions (which contributed Rs 65-70 crore collectively during the quarter), the like-to-like growth stood at ~30% yoy.
- Lupin's consolidated operating profit margin (OPM) shrank by 40 basis points yoy to 16.8% in Q3FY2008, led by a 50-basis-point rise in the other expenses. The operating profit grew by 40.8% to Rs 121.5 crore in the quarter.
- The company received Euro 20 million from the sale of its Perindopril patent rights to Laboratories Servier of France, which boosted the other income and the net profit substantially. As a resultant, the net profit level grew by a whopping 191.6% to Rs 180.9 crore in Q3FY2008.
- At the current market price of Rs 515, Lupin is discounting its FY2008E earnings by 14.4x and its FY2009E earnings by 11.7x.
- I maintain Buy recommendation on Lupin with a price target of Rs 840.
