Motilal Oswal has given Neutral recommendation for Lupin with a target price of Rs. 590 in its research report issued on May 19, 2022
Motilal Oswal’s research report on Lupin
Lupin (LPC) delivered lower-than-expected 4QFY22 performance. Lower US sales coupled with lower operating leverage impacted operating margin adversely during the quarter. We cut our EPS estimates by 29%/27% for FY23/FY24 to factor in: a) intensified competition in the US base portfolio, b) loss of exclusivity for certain products in the domestic formulation (DF) segment, c) reduced offtake of API sales, and d) considerable rise in operational costs. We value LPC at 22x 12M forward earnings to arrive at our TP of INR590. Considering the subdued growth outlook in focus geographies, cost pressures not abating and unattractive valuation, we maintain our Neutral rating on the stock.
We expect 15% earnings CAGR over FY22-24, led by 10%/5% sales CAGR in DF/US and 40bp margin expansion on account of cost rationalization measures. We believe current valuation adequately factors upside in the earnings and hence maintain Neutral rating on the stock.