Broker's call

Angel Broking

Lupin (Buy)

CMP: Rs 475

Target: Rs 593

Lupin reported net sales of Rs 1,792 crore, up 21.9 per cent y-o-y, in-line with our estimate. The company's gross margin expanded to 65.1 per cent, above our expectation of 62.5 per cent, because of better product mix.

This led to OPM expanding to 19.3 per cent. However, Lupin reported a low digit growth of 5 per cent in its bottom line to Rs 235 crore, which also came in below our estimate of Rs 261 crore.

This was mainly on account of higher tax-outgo during the quarter than expected by us.

We expect Lupin's net sales to post a 20.4 per cent CAGR to Rs 8,426 crore and earnings to report a 24.0 per cent CAGR to Rs 29.7/share over FY2011–13E. We maintain our Buy recommendation with a target of Rs 593.

Ipca Labs (Buy)

CMP: Rs 323

Target: Rs 393

Ipca reported net sales of Rs 602 crore, up 29.9 per cent y-o-y, just in line with our estimate of Rs 588 crore. The company posted OPM of 23 per cent. Recurring profit came in at Rs 104 crore, higher than our estimate of Rs 53 crore. Segment-wise, for the third quarter, the overall formulations business grew by 38.5 per cent to Rs 477 crore, contributing 79 per cent to the company's total revenue.

The API business witnessed 4.8 per cent growth during the quarter to Rs 124.4 crore, contributing 20.7 per cent to the total revenue. Adjusted net profit for the quarter grew by 97 per cent to Rs 104 crore.

We expect net sales to post a 22.4 per cent CAGR to Rs 2,907 crore and EPS to register a 36.9 per cent CAGR to Rs 32.7 over FY2011–13E, driven by the US and domestic markets and the API segment. We recommend ‘Buy' with target price of Rs 393.

IDBI Capital

Ashok Leyland (Hold)

CMP: Rs 27

Target: Rs 27

We raise our revenue estimates up by 3-4 per cent to factor in better volumes led by Dost. However, we cut our EBITDA margin estimates by 20 bps/60bps to 9.9 per cent/9.7 per cent to factor in weak margin performance in third quarter and expected negative impact from higher share of low margin Dost LCV in fiscal year 2013 (13.7 per cent vis-a-vis 7 per cent in FY12E and 0.9 per cent in FY11).

Consequently our EPS estimates are maintained at Rs 2.1-2.5. The stock has run up 36 per cent in past 1.5 months. Reiterate ‘Hold', with price target of Rs27.

MSFL

Crompton Greaves (Hold)

CMP: Rs 146

Target: Rs 137

We have revised our estimates factoring in the strong sales and weak margins for the current quarter. We have revised our sales estimates upwards by six and seven per cent for FY12 and FY13 respectively; while trimming earnings estimates by 21 per cent and 8 per cent for FY12 and FY13 respectively.

Decline in earnings and margin erosion have caused de-rating in the stock and at revised estimates. CG's improving order book and possibility of margin improvement in FY13; give us comfort that downside to the stock is limited and therefore we maintain ‘Hold' with a TP of Rs 137.

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