Buy Lupin; target of Rs 1015: Motilal Oswal

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Motilal Oswal 's research report on Lupin

Lupin’s (LPC) 1QFY21 PAT was the lowest over the past four years. The significant cost savings benefit was offset by the sharp decline in US sales and higher employee cost. However, based on niche launches like g-albuterol sulfate in the US, biosimilar Enbrel in the EU and gradually improving outlook for domestic formulation (DF), we expect better earnings prospects going forward.We have cut our EPS estimate by 11.9%/10.5% for FY21/FY22E to factor in the COVID led impact on DF/ROW and gradual re-building of metformin sales (post recall). We value LPC at 24x (40% discount to its 3-year average) 12M forward earnings to arrive at a price target of INR1,015. We remain positive on LPC due to (a) limited competition product approvals, (b) increase in market share in existing products, and (c) completion of remediation measures at sites under regulatory issues over the near term. Maintain Buy.

Outlook

We value LPC at 24x 12M forward earnings to arrive at a price target of INR1,015. Maintain Buy.

For all recommendations report, click here

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