Hold Lupin; target of Rs 905: Emkay Global Financial
Emkay Global Financial recommended hold rating on Lupin with a target price of Rs 905 in its research report dated May 30, 2020.
Emkay Global Financial’s report on Lupin
Operating profits beat estimates but did not fully reflect the operating leverage from strong growth in the US/India. The beat was largely on account of lower R&D spends. US/India growth was partially aided by Covid-19-related pre-buying. Guidance for lower tax rate (35% vs. 40% earlier) and rationalization of Solosec-related spends by around 40% (US$ 55-60mn currently) were positive takeaways. Goa, Somerset, and Pithampur will be offered for re-inspection to USFDA in the next three months. Q1 should be weak across key markets like India and US (US Rx are down 20% vs. pre-Covid-19). US should improve subsequently from Levothyroxine ramp-up (~13% market share currently, can go to 20%+, per LPC) and gAlbuterol approval (before H2FY21).
We raise EPS by 8%/5% for FY21/22E, largely due to lower taxes. We retain Hold, with a revised TP of Rs905 (Rs670 earlier), valuing the stock at 25xJun’22 EPS in line with the long-term average (20x earlier) to account for improving visibility in the US. LPC is an OW in EAP.
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First Published on Jun 2, 2020 11:43 am