Result Update on Lupin for 4QFY2011

Result Update on Lupin for 4QFY2011 with a Buy recommendation and a Target Price of `593 (12 months).

For 4QFY2011, Lupin reported mostly in-line results. The company registered revenue growth of 17.5% yoy to `1,512cr, despite reporting just 10% yoy growth in advanced markets, which are the key markets for Lupin. The domestic market reported 20% yoy growth during 4QFY2011. We maintain our Buy recommendation on the stock with a revised target price of `593.

Mixed set of numbers, but outlook intact: Lupin reported net sales of `1,512cr (`1,286cr), up 17.5% yoy, above our estimate of `1,489cr. Gross margin dropped to 59.3% (62.0%), which we had expected to be flat for the quarter. This led to OPM contracting to 17.8% (19.5%), lower than our estimate of 18.6%. Lupin reported single-digit net profit growth of 3% yoy to `227cr (`220.5cr), lower than our estimate of `239cr for 4QFY2011. For the full year, Lupin reported revenue and PAT growth of 19.5% and 26.5%, respectively.

Outlook and valuation: We expect net sales to grow at a 20.4% CAGR to `8,272cr and earnings to grow at a 24.0% CAGR to `29.7/share over FY2011–13E. Currently, the stock is trading at 19.7x and 14.8x FY2012E and FY2013E earnings, respectively. We maintain our Buy recommendation on the stock with a revised target price of `593.