{LONGTERMINVESTORS} Stock Update-Lupin

March 30, 2016   Stock Update Lupin Reco: Hold PT: Rs1,758 CMP: Rs1,475 USFDA issues 483 observations at Mandideep plant   Key points Event: USFDA inspection reports 483 observations at Mandideep plant (both API and formulation units): Lupin has received two observations each (under 483) from the US Food and Drug Administration (USFDA) for its Mandideep active pharmaceutical ingredient (API) and formulation plants after the inspection, which was carried out in between February 8-19, 2016. The observations are related to "use of non-conforming intermediate for making APIs", cleaning standard operating procedures and inappropriate equipment design. Impact-Low risk to operations: Mandideep is the second largest revenue contributor to Lupin's US business after Goa. However, there are no pending abbreviated new drug applications (ANDAs) from this plant and nor does it support ANDAs at other plants, as per the clarification of the management. Hence, it would not affect growth, given that no approvals are at risk. Focus on Goa plant outcome: We remain focused on the Goa plant and the outcome of 483s issued there in March 2016 and July 2015, given that it is a large source of Lupin's pipeline and any delay in product approvals could hurt earnings forecast. Product approvals from this plant would be the key to monitor. Outlook and valuation: We believe that in the near term, the stock is likely to remain range bound till the USFDA concerns subside, especially since a few observations are repetitive in nature. Moreover, it is little worrying reflected by the fact that it is the second plant under the USFDA scanner in a short period of time. We have not reviewed the 483s yet but are relying on the management's clarification on the issues. We have maintained our Hold rating on the stock and have retained our price target of Rs1,758 (valuing the stock at 22x its average earnings of FY2017E and FY2018E).     Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. Regards, Sharekhan Fundamental research team www.sharekhan.com

--
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.