Lupin shares snapped a three-day losing streak on Wednesday as shares of the drug major settled 5.21 per cent up at Rs 1,474.50. The scrip plunged 9.56 per cent in the previous three trading sessions till March 29. The fall was steepest on Tuesday when Lupin shares slid over 6 per cent after it said the USFDA had issued some ‘minor’ observations on Mandideep unit.
According to Macquarie, the observations can put pressure on valuation multiples even as they do not impact the business in near-term. The global brokerage house cut the price target for shares to Rs 1,800 from Rs 2,200 earlier. However, it maintained ‘outperform’ rating for Lupin.
The FDA had issued 9 observations on Lupin’s Goa facility earlier in March. Macquarie estimates Goa and Mandideep facilities account for about 2/3rd of Lupin’s US sales. 22 of 39 brokerages covering the stock rate it ‘buy’ or higher, 11 ‘hold’ and 6 rate it ‘sell’ or lower with a median price target of Rs 1970.
Lupin had an audit at its Mandideep location from Feb 2 to Feb 19 last month. There were total 3 observations. As the site has both dosage form facility and API facility, 2 separate form 483s were issued with 2 observations each. 1 of the observations was repeated in both the forms as it is relevant to both operations. The company believes that these observations are minor in nature and the company has already addressed these observations.
Lupin is marginally cheaper than its peers (forward PE of 19.35x vs 19.50x), but its EPS growth rate is much slower, according to Thomson Reuters data
Angel Broking maintains ‘accumulate’ rating on Lupin shares with a price target of Rs 1560.
The company’s Mandideep facility is engaged in the manufacturing of APIs as well as dosage forms which produces sterile and non-sterile pharmaceutical products and mainly caters to the US and Europe markets. It employs over 1,200 people and was established in 1986.
(With inputs from agencies)