Inspite Of Good Results Lupin Reacted Negatively

It was quite mysterious to find that even after a fabulous quarterly result, Lupin shares stood among the top 5 Sensex losers. Lupin share price fell from an intraday high of Rs. 1728 to a low of 1601, closing close to the intraday low at only 1608 as on 9th August 2016, post the results were announced.The company has done well as per financial performance but has not been able to do well in the markets. Lupin has underperformed the markets with share price only growing by 3.39% over the past month since 8th August 2016, whereas, Sensex has grown by 3.89% over the same period.

The difference further widens when quarterly performance between the SENSEX prices is compared with those with LUPIN. We find Sensex rose as much as 11.71% but LUPIN could gain a mere 6.69% in prices over the quarter.

Lupin is an innovation led transnational pharmaceutical company which produces and develops a wide range of branded & generic formulations, biotechnology products and APIs globally.

Lupin is the 2nd largest Indian pharmaceutical company by market capitalization.

Lupin’s Managing Director Nilesh Gupta said that the company has delivered its best results to date in tune with its growth momentum and the quarterly results do support his statements.

Strong Financial Performance Indicators:

• Net Sales for the quarter grew by 40.0% and was Rs. 43,136 m as per Q1FY17, as compared to Rs. 30,809 m. in Q1 FY16.
• Net Sales grew by 5.7% in Q1FY17 QoQ as compared to Rs. 40,823 m. in Q4 FY16
• Earnings before Interest, Tax, Depreciation and Amortization for the quarter was 32.2% of net sales and grew by 54.4% standing at Rs. 13,907 m as on Q1FY17. as compared to Rs. 9,005 m. in Q1 FY16
• EBITDA in Q1 FY2017 grew by 3.8% in Q1FY17 QoQ from the figures of Rs. 13,399 m. as onQ4 FY2016
• Net profits for the quarter grew by 55.1% to Rs. 8,820 m.as in Q1FY17 as compared to Rs. 5,686 m. in Q1 FY16
• Net profits in Q1 FY2017 grew by 17.9% sequentially as compared to Rs. 7,479 m. in Q4 FY2016
• Material cost decreased by 2.4% to 29.5% of net sales, at Rs. 12,719 m., as compared to Rs. 9,835 m. in Q1 FY2016 indicative of better profitability prospects.
• Investment in Research for the quarter was Rs. 4,994 m., 11.6% of net sales, which is a positive indicator, indicative of company’s expansion plans.

Lupin has performed well in the FY16 as compared to FY15 with all the profitability ratios seeing an uptrend and an EPS rise being seen from 53.41 in FY15 to 64.1 in FY16.The strong financial performance and an impressive amount set aside for Research and Development indicates a very strong future of the Company.

Investment Opinion: BUY at support level of 1 Month low of 1550.

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