1. Edelweiss maintains ‘Hold’ rating at revised TP of Rs 1,220 on Lupin post its Q4 results

Edelweiss maintains ‘Hold’ rating at revised TP of Rs 1,220 on Lupin post its Q4 results

Lupin posted a 49.61 per cent decline in consolidated net profit to Rs 380.21 crore for the fourth quarter ended March as compared to net profit of Rs 747.88 crore in the corresponding quarter of previous fiscal.

By: | Published: May 25, 2017 2:25 PM
Lupin posted a 49.61 per cent decline in consolidated net profit to Rs 380.21 crore for the fourth quarter ended March as compared to net profit of Rs 747.88 crore in the corresponding quarter of previous fiscal.

Lupin announced its fourth quarter results on Thursday and reported a 49.61 per cent decline in consolidated net profit to Rs 380.21 crore for the fourth quarter ended March as compared to net profit of Rs 747.88 crore in the corresponding quarter of previous fiscal. The fall was mainly on account of increase in expenses and impact of foreign exchange fluctuation. Reacting to the results, the share price of the pharma major fell over 9 per cent intraday on Thursday. At 1.39 pm, Lupin share price was trading 8.77 per cent down at Rs 1120. The share price opened at Rs 1175.25 and touched a high and low of Rs 1180.65 and Rs 1108, respectively, in trade so far. Sensex was trading 195.47 points up at 30,497.11. Brokerage House Edelweiss has maintained a ‘Hold’ rating on the stock with revised target price of Rs 1,220.

The pharma company’s consolidated total revenue from operations rose to Rs 4,253.30 crore for the quarter under consideration as compared to Rs 4,197.42 crore for the same period year ago. Its net profit for the fiscal year ended March this year stood at Rs 2,557.46 crore as against Rs 2,260.74 crore for the year-ago period. The company in a BSE filing said that its total revenue from operations also rose to Rs 17,494.33 crore for the fiscal year ended March 31, 2017 as compared to Rs 14,255.54 crore for the previous fiscal year.

The net impact of foreign exchange fluctuation on earnings before interest, taxes, depreciation and amortisation (EBITDA) was a loss of Rs 168 crore during the fourth quarter of FY17 as compared to a gain of Rs 26.7 crore during the fourth quarter of FY16.

During the period under review, the company filed 25 abbreviated new drug applications (ANDAs) and received 7 approvals from the USFDA. Cumulative ANDA filings with the USFDA were 68 as of March 31, 2017, with the company having received 214 approvals to date.

Brokerage House Edelweiss has made the following observation on the stock

-Lupin’s (LPC) Q4FY17 revenue rose mere 1% YoY and EBITDA & PAT plummeted 41% & 49% YoY, respectively, due to decline in core EBITDA margin as well as certain one-off charges. Though US revenue tumbled 15% YoY and 13% QoQ, top line was salvaged by good growth in non-US business—up 18% YoY. We believe, Street’s growth as well as margin estimates are at risk due to not just the steady decline of Glumetza and Fortamet, but also disappointments in Gavis and LPC’s organic pipeline.

-FY18/19 will be challenging as growth will slow down and investments will pick up, thereby pressuring profit, which we expect to decline. Ergo, we revise down FY18E and FY19E EPS 20% and 14%, respectively.

– Company outlook for FY18 is weak with US expected to remain flat at best. US business growth to remain disappointing during FY18/19. This will lead to 4% EPS CAGR over FY17-19E and RoCE to dip from peak of 40% in FY15 to 15.7% in FY19E due to inorganic initiatives and higher capex.

– The Colesevelam/ Sevelamer franchise has been delayed further to FY19 end. We believe, despite potential good number of launches in the medium term, it will be challenging to offset the growing erosion in gFortamet and gGlumetza. Moreover, pricing pressure and concentration risk in the US portfolio will render growth challenging in FY18/19. Not only will growth dip, margin trajectory too will be difficult to maintain due to fall in these lucrative US products and R&D expenses inching up.

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