Analysis of Lupin Ltd

Introduction

Lupin Ltd is among the top 5 pharmaceutical companies in India, with a market capitalisation of Rs 20,000 Cr. What differentiates it from the other Indian pharma giants is its foray into the US market with a branded paediatric drug Suprax. With, the branded drug, they can boast of a bigger profit margin as compared to its Indian peers. In the coming year or two, Lupin is going to launch few more branded drugs, which increases its potential of growth in US.

With small acquisitions across the globe, viz Kyowa Pharma - Japan, Pharma Dynamics - South Africa, Multicare Pharma - Phillipines and Generic Health - Australia, they have obtained a toe hold in both emerging as well as developed markets, which they can leverage to their advantage.

Financials

Standalone sales for Q2FY11 stand at Rs 1073.09 Cr as against Rs 1009.36 Cr. This discounts the growth caused by the acquiations, which saw the consolidated sales growing from Rs 1114.69 Cr in Q2FY10 to Rs 1405.05, a growth of 26%.

At the same time consolidated PAT grew from  Rs 164.62 Cr to Rs 220.69, a growth of 34%, which shows an increasing margin.

The consolidated EPS has grown from 3.8 to 4.83 in the same period.

The half yearly EPS stands at Rs 9.24 against Rs 7.18 for the previous quater. The annualised current EPS is Rs 18.48, which puts the PE multiple (Price: Rs 450) at 24.35, much lower than its peers, namely Dr Reddy for which it stands at 30.68 (Current EPS of Rs 54.98  growing at a slower pace and Price of  Rs 1687) and Sun Pharma for which it stands at 33.48 (Current EPS of Rs 12.9 and a stock price of Rs 432).

Assuming the market remains steady, the stock can grow to 550, which will bring the PE multiple to its peer level of 30.

The long term debt to equity ratio stands at 0.05 for FY10 and total debt to equity ratio at 0.35. An increasing inventory turnover ratio is also a good sign for the company, in FY10 it stood at 5.7 as against 4.53 for the previous fiscal. In the same period current ratio has also increased from 1.71 to 2.45.

The company is poised for another patch of rapid growth.