Shares of Lupin Ltd. jumped to hit an over-six-year high on Tuesday after Nomura raised the target price on the stock, citing expectations of an improved Ebitda margin and favourable risk-reward ratio.
The brokerage raised its target price for Lupin to Rs 1,593 apiece from Rs 1,290 per share earlier.
"We estimate that India formulation, growth markets and US/Europe/API will contribute 50–55%, 20-25% and 20–30%, respectively, of consolidated Ebitda in FY24–26F," Nomura said in a report.
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The brokerage also expects growth in the pharma company's domestic business on the back of field-force expansion and chronic segment presence.
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"Bolt-on acquisitions in India and other markets could support growth and profitability. We expect Ebitda margin expansion driven by new launches, cost control/operating leverage."
Nomura also raised its EPS estimates for FY24, FY25 and FY26 by 8%, 2%, and 14%, respectively. It said that the revisions are driven by higher gSpiriva sales and delays in gSuprep competition, contributions from gJynarque exclusivity, and currency movements.
Key risks for the stock include delay in approval of key products, higher than estimated price erosion, adverse currency movement, adverse regulatory developments, higher than estimated cost pressures, and slower than estimated growth in India.
Shares of Lupin rose 5.23% intraday, the highest since April 26, 2017. They pared gains to trade 4.10% higher at 10:28 a.m., compared to a 0.6% decline in the NSE Nifty 50.
The stock has risen 3.41% year-to-date. Total traded volume so far in the day stood at nine times its 30-day average. The relative strength index was at 69.72.
Of the 40 analysts tracking the company, 12 maintain a 'buy' rating, 11 recommend a 'hold,' and 17 suggest a 'sell', according to Bloomberg data. The average 12-month consensus price target implies a downside of 15.3%.
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