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Centrum Broking
Lupin (Buy)
CMP: ₹1,355.15
Target: ₹1,680
We maintain ‘Buy’ rating on Lupin for the following reasons:
Strong sales growth of 19 per cent y-o-y: Lupin reported 19 per cent y-o-y growth in revenues due to good growth of 23 per cent y-o-y in the US and European formulation business (44 per cent of revenues). This business grew to ₹1,359 crore from ₹1,109 crore. Margin improves by 150 bps: Lupin’s operating profit margin grew by 150 bps y-o-y to 26.2 per cent from 24.7 per cent due to reduction in other expenses. The company’s material cost grew by 220 bps to 33.7 per cent from 31.5 per cent due to change in product mix with higher growth in regulated markets.
US business to drive growth: Lupin is the market leader in 31 out of 75 products in the US generic market. The company’s 54 products are among the top three in the US generic market. It has a basket of oral contraceptive products for the US market. Consistent performance: We expect Lupin to report consistent performance due to strong growth in the US, India, Japan and rest of the world markets. Key risks to our estimates would be regulatory issues for its manufacturing facilities and slowdown in the domestic market.
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