Lupin's Net Up Despite Slower Growth In Revenues

Lupin's shares nosedived 6% after the company reported subdued numbers for the first quarter of the current fiscal. Company reported 9% growth in the revenues to Rs 2420 crore. Its net profit rose 42% to Rs 405 crore, due to three fold increase in the other income.

During the quarter, its US and European revenues rose by 29% to Rs 1099 crore. Its domestic revenues however declined by 5% to Rs 589 crore. Its Japan revenues also declined by 12% to Rs 292 crore. Revenues in South Africa and Rest of the world markets grew by 12% and 4% respectively. API revenues for the quarter also rose by about 5% to Rs 242 crore.

The quarter has seen material cost rising just by 1.7% to Rs 574 crore. Employee cost rose by about 9% while other expenses remained flat for the quarter. Owing to the lower run rate in these major expenses, EBITDA margins improved by over 300 basis points. For the quarter margins stood at 23.81% against 20.31% in the first quarter of the last fiscal. On sequential basis there is decline in the margins.

The other income for the quarter stood at Rs 100 crore showing a two fold rise. Other income contributed 25% in its net profit while it stood at 8% in June quarter last fiscal and 1.5% in the March quarter. Excluding the other income the net profit of the company has grown by 16%.

Company earlier in its AGM said that it is expecting revenues of USD 5 billion in 2018. Currently its four quarter annualized revenues stand at Rs 9663 crore and if it needs to achieve USD 5 billion revenues, then it will have to achieve a CAGR of 25%. With the growth rate of 9%, it certainly looks little difficult to achieve this milestone.

Nevertheless, slower revenues in just one quarter quarter should not be criteria to really judge the long term growth rate of the company. We have always remained positive on Lupin and believe that there is a good steam left in the stock. We are of the opinion that the after the current fall one should buy this stock.