Sell Lupin; target of Rs 753: Dolat Capital

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Dolat Capital's research report on Lupin

Though Lupin’s pipeline in the medium term boasts of complex therapies like inhalation and biosimilars such as Brovana (FY22), Dulera, Spiriva, Pegfilgrastim launch in FY23E, and an injectable portfolio beyond FY23, trading at 25.4x FY22 EPS of Rs34.6, we believe Lupin’s stock is fully valuing the US pipeline of near term launches and cost improvement driving higher margins (build in 355bps margin improvement over FY20-22E). Slower ramp up in Solosec, higher expectation from Albuterol (though pricing environment is stable, traction could be gradual, we built in $65mn in FY21), risks to earnings remain high. Further, cost optimization benefits (we believe restructuring in the US was related to Solosec sales force reduction) will be key for the company to achieve EBITDA margin expectation of 20% over the next 2 years.

Outlook

Regulatory news-flow on Goa, Indore and Somerset (all ready for inspection) will act as key triggers. Though the management remains confident of its complex generic portfolio for the next few years, we believe the opportunities are back ended in nature. Maintain SELL.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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