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Recommendations India

Lupin 4QFY2014 performance highlights and results update

May 8, 2014, Thursday, 12:39 GMT | 07:39 EST | 16:09 IST | 18:39 SGT
Contributed by Angel Broking


For 4QFY2014, Lupin posted numbers ahead of our expectations on the OPM and net profit front, while the sales came in lower than expected. During the quarter, the company posted a revenue growth of 20.3% to Rs.3,052cr V/s an expected Rs.3,598cr, mainly driven by exports (the Indian market posted a mere growth of 2% yoy). The company posted an OPM of 26.6% V/s 24.0% in 4QFY2013 (also, higher than our expectation of 24.0%), an expansion of 265bp yoy. Expansion in the OPM, along with robust growth in other income (which grew by 35.6% yoy) aided its net profit to came in at Rs.553cr (V/s an expected Rs.500cr), ie a yoy growth of 35.5%. We maintain our Accumulate rating on the stock with a target priced of Rs.1,068.

Better-than-expected OPM and net profit growth: During the quarter, the company posted a revenue growth of 20.3% to Rs.3,052cr V/s an expected Rs.3,598cr, mainly driven by exports. The growth in exports was led by the US (its key market), which grew by 28% yoy, while the ROW grew by 38% yoy. Among other markets, Europe and Japan grew by 20% yoy and 17% yoy respectively. The company posted an OPM of 26.6% V/s 24.0% in 4QFY2013 (also, higher than our expectation of 24.0%), an expansion of 265bp yoy. An expansion in the OPM along with robust growth in other income (which grew by 35.6% yoy) aided the net profit to came in at Rs.553cr (V/s an expected Rs.500cr), ie a yoy growth of 35.5%.

Outlook and valuation: We expect Lupin to post a CAGR of 16.7% in net sales to Rs.15,099cr and earnings to report a 14.2% CAGR to Rs.53.4/share over FY2014–16E. Currently, the stock is trading at 21.0x and 18.5x FY2015E and FY2016E earnings, respectively. We recommend an Accumulate on the stock.