Lupin shares tank 8% despite 48% rise in Q4 net profit, here is why

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New Delhi | Updated: May 20, 2016 4:44 PM

Lupin Limited shares plunged nearly 8 per cent in early trade on Friday despite the pharma major reported 47.54 per cent rise in its consolidated net profit figures at Rs 807.08 crore for the quarter ended March 31, 2016

Lupin Q4 results - share priceLupin Limited shares plunged nearly 8 per cent in early trade on Friday despite the pharma major reported 47.54 per cent rise in its consolidated net profit figures at Rs 807.08 crore for the quarter ended March 31, 2016 (Photo: Reuters)

Lupin Limited shares plunged nearly 8 per cent in early trade on Friday despite the pharma major reported 47.54 per cent rise in its consolidated net profit figures at Rs 807.08 crore for the quarter ended March 31, 2016 against Rs 547.01 crore in the corresponding quarter a year ago.

At 9.30 am, Lupin was trading 5.30 per cent down at Rs 1,568. The scrip opened at Rs 1,620 and has touched a high and low of Rs 1,627.50 and Rs 1,525.35, respectively, in trade so far. The scrip later settled the day 9.10 per cent down at Rs 1505.15.

Net sales of Lupin jumped 33.96 per cent year-on-year to Rs 4,091.32 crore in the quarter under review. It had posted net sales of Rs 3,054.04 crore in the same quarter last year.

Post Q4 results, Sharekhan in a research note said, “We have revised downwards our estimates for FY2017 and FY2018 by 6.3 per cent and 4.4 per cent respectively mainly due to increase in interest cost (due to increase in debt on account of acquisition) and higher tax rate (30 per cent vs earlier 28 per cent). Also, 483 observations from the USFDA continue to remain overhang for near term and poses an upside risk to our valuation. Hence, we have retained our ‘Hold’ rating with a revised price target of Rs 1,850, valuing the stock at 22 times its earnings of FY2018E.”

According to the brokerage house, Lupin continues to work holistically to resolve the pending USFDA 483’s at Pithampur (Indore), Aurangabad, Goa and Mandideep plants. The company has responded on Goa observations with a follow-up update and awaits FDA response. Around 30 products are pending approval from Goa plant and around 70 from Pithampur (Indore) site. It has initiated site transfer from Goa to other FDA approved sites.

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