Lupin Ltd. share price target

3QFY18 revenue fell 11% YoY to INR39.8b (est. of INR40b). Gross margin shrunk 600bp YoY (-240bp QoQ) to 65%. EBITDA fell ~22% YoY to INR6.9b(est. of INR8.8b), with the margin contracting ~1,000bp YoY (-430bp QoQ) to ~17.3%. 3QFY18 EBITDA included a forex loss of ~INR821m v/s a gain of INR571m in 2Q and a gain of INR276m in 3QFY17. PAT fell 65% YoY to INR2.2b (est. of INR4.3b)

For 2QFY2018, sales came in at `3,874cr (`4,000cr expected) v/s. `4,212cr in 2QFY2017, a yoy de-growth of 8.0%. On operating front, the EBITDA margins came in at 20.0% (19.6% expected) v/s. 22.5% in 2QFY2017, mainly on the back of lower than expected sales during the quarter & dip in the gross margins. Thus, the PAT came in at `455cr ..

USFDA has issued a combined warning letter to Lupin's two manufacturing sites located at Goa and Indore (Pithampur unit II) These plants account for a larger share of the pending ANDA pipeline During the recent quarterly discussion, Management was quite confident of the clearences from the authorities, however, we had revised down a TP to Rs867 (earlier Rs1,039). Now with the focus of the management for corrective actions, we expect the costs to gain momentum. Key Highlights and Investment Rationale...

As a result, despite cutting our top-line and earnings estimates by 6%/7% and 24%/18% for FY19/20E respectively, we maintain a BUY rating on the stock, with a revised TP of Rs 1,125 (20.x Sep-19E). We have also cut our earnings multiple from 22x to 20x to factor in the impact on growth in the US business. With the US FDA issuing a combined warning letter to Lupins (LPC) important Goa and Pithampur (Unit II) facilities, the stock price plummeted 17% in a day. While we acknowledge that this warning letter will lead to a substantial reduction in the number of approvals for the US market over the next 12-18 months (12-15 from 30-35 earlier), many of the lucrative and near-term opportunities are filed from other facilities.

In a negative development for Lupin, USFDA has issued a combined warning letter for Lupin's Goa (oral solid) formulation plant and Pithampur (Indore) unit II (oral solid, ophthalmic) formulation plants. Although normal despatches from these two facilities will likely continue, any further new launches will be delayed until the resolution of the warning letter. Lupin's management expects resolution of this warning letter within 12-15 months. In the meantime, the management has identified at least 12 pending ANDAs (of total 45-50 pending ANDAs from these two...

No data integrity issue was highlighted in the warning letter. Two key things highlighted by US FDA in the Warning Letter was 1) investigation of OOS studies was not proper; 2) hold time study procedure requires changes...

Q2 EBITDA (-17% YoY) was in line led by lower operating costs, but PAT (-31% YoY) was 12% above our estimate (2.5% above consensus) on higher other income and lower tax. Weak performance in higher-margin US business (-30% YoY/-14% QoQ) was partly offset by higher revenue from India, LatAM, EMEA.

Lupin's Q2FY18 results were in-line with our expectations. Total revenues were down by 3.2% compared to our estimates at Rs38.7bn down 8% YoY while Adj. PAT was down by 0.7% at Rs4.57bn against our estimates of Rs4.6bn which was due to...

Maintain BUY with a revised TP of Rs. 1,565 (22x Sep19E). Lupins (LPC) performance in 2QFY18 was decent, and largely in-line with our estimates. The top-line declined 8% YoY, on a high base that included sales of gGlumetza and gFortamet with limited competition. However, there was sequential growth of ~2%, driven by a robust performance in the India business (up 16% YoY/24% QoQ).

Headline beat but no convincing signs of a turnaround yet 2QFY18 was the first quarter of sequential earnings growth for Lupin, after 4 consecutive quarters of sequential decline, driven primarily by strong margin performance (EBITDA margin improving by 173bps QoQ to 21.6%), supported by cost optimisation measures and controlled R&D; spend. While revenues of INR 39,520mn were broadly in-line with our estimates, EBITDA/PAT of INR 8,531mn/4,550mn beat our est. by 11%/25% due to stronger margin performance. US disappointed yet again with revenues declining by USD 34mn QoQ to USD 204mn (JMFe USD 223mn) mainly on account of volume loss in gGlumetza, base...