Lupin : Recommendation Review

In this issue, we have reviewed Lupin. We suggest that investors book partial profits in this counter.

Lupin

Book Partial Profits

We had analysed and recommended Lupin when it was trading at a price of Rs 523 in DSIJ Vol. 27, Issue # 15 (dated July 2, 2012). The scrip has lived up to our expectations and returned an astounding 26 per cent till date. Investors also have benefited from the dividend of Rs 3.20 announced by the company.

Lupin operates in the advanced as well as the emerging markets. The US is the key market for the company, from where it generates nearly 40 per cent of its total revenues. It has been launching many products in the US market, due to which its earnings in the last three quarter have been strong. Besides, the company’s business in Japan has started showing a good performance after the acquisition of I'rom Pharmaceuticals in FY12. All of this adds to the conviction that we have had in this counter.

The pharma sector as a whole has been doing well for many years now. Companies exporting their products are further reaping the benefits of a surge in the demand for generic products as well as the huge depreciation of the rupee. Lupin is a prominent company in the sector, and the high growth rate it has witnessed made a case to invest in the stock. Its management quality is another factor which adds to its credibility as an investible idea. The firm is strong enough and hopes to earn USD 3 billion in revenues by 2015.

We believe that the 26 per cent return that stock has garnered so far looks good. But there is still some steam left in the stock. As the markets have turned volatile, investors can book partial profits in the scrip and continue to hold the rest for another year to get better returns going forward.