For 4QFY2016, Lupin posted results above our expectations. Sales came in at
Rs4,091cr (V/s Rs3,665cr expected), up 34.0% yoy. Sales growth was driven by
Formulations (Rs3,807.5cr) which rose by 38.6% yoy, while API (Rs283.8cr)
witnessed a dip of 7.7% yoy. On the operating front, the EBDITA margin came in
at 31.2% V/s 25.1% in 4QFY2015 and V/s our expectation of 29.5%. The
expansion in the OPM was on the back of a firmer GPM which came in at 73.8%
V/s 67.9% in 4QFY2015 and V/s 72.7% expected. This along with high other
income at Rs115cr (V/s Rs41cr in 4QFY2015) led the net profit to come in at
Rs807cr V/s Rs547cr in 4QFY2015 and V/s Rs829cr expected. We recommend a
Buy on the stock with a price target of Rs1,809.
Numbers outperform our expectations: Sales for the quarter came in at Rs4,091cr
(V/s Rs3,665cr expected), up 34.0% yoy. Sales growth was driven by Formulations
(Rs3,807.5cr) which rose by 38.6% yoy, while API (Rs283.8cr) witnessed a dip of
7.7% yoy. Formulation sales were driven by USA (Rs2,187.1cr, +58.7% yoy),
Europe (Rs125.4cr, +40.7% yoy), India (Rs761.5cr, +14.7% yoy, Japan (Rs344.2cr,
+17.0% yoy) and ROW (Rs275.8cr, +38.3% yoy). On the operating front, the
EBDITA margin came in at 31.2% V/s 25.1% in 4QFY2015 and V/s our
expectation of 29.5%. This along with high other income at Rs115cr (V/s Rs41cr in
4QFY2015) led the net profit to come in at Rs807cr V/s Rs547cr in 4QFY2015 and
V/s Rs829cr expected.
Outlook and valuation: We expect Lupin to post a net sales CAGR of 16.7% to
Rs18,644cr and earnings CAGR of 17.2% to Rs69.3/share over FY2016–18E.
Currently, the stock is trading at 25.9x and 21.7x its FY2017E and FY2018E
earnings, respectively. We recommend a Buy on the stock.
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