Lupin - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, Lupin's net sales grew by 28.6% yoy to Rs.2,239cr, above our expectation of Rs.2,058cr. However, the OPM for the quarter stood at 20.3%, higher than our estimate of 19.1%. The net profit came in at Rs.290cr, higher than our expectation of Rs.270cr. We continue to maintain our Buy view on the stock.

Better than expected numbers: Lupin reported net sales of Rs.2,239cr, up 28.6% yoy, higher than our estimate. The company's gross margin came in lower at 60.3%, ie lower than the last corresponding period (65.7%). However, inspite of the same, on the back of lower R&D expenses, the OPM came in at 20.3%, higher than our expectation of 19.1% (but lower than 21.4% in 2QFY2012).

Inspite of the robust operating profit growth the net profit grew only by 8.6% yoy on account of higher taxation and interest expenditure; the net profit for the quarter stood at Rs.290cr.

Outlook and valuation: We expect Lupin's net sales to post a 19.3% CAGR to Rs.10,082cr and earnings to report a 26.5% CAGR to Rs.31.1/share over FY2012-14E. Currently, the stock is trading at 21.6x and 18.1x FY2013E and FY2014E earnings, respectively. We maintain our Buy recommendation on the stock with a target price of Rs.647.