Last month we shared our views and also covered the fourth quarter results of Lupin Limited with you all. You can check that blog by clicking here if you had missed it out.

During its fourth quarter results Lupin stock prices fell down by 7% and was trading at Rs 1,140. Today, they are trading around Rs 1,060, down by another 7% from that point.

So, what should investors do?

Did anything changed materially?

What materially changed

Let us deal first with what materially changed. The company announced three products in last one month in USA. The total market of those products is US$1,140 million. Here, what market share can Lupin capture from its network? 2%, 5% or 10%.

Let us take conservative approach of say 2%, then all things being equal, we will see increase of around US$23 million revenues and that represents in today’s exchange in Indian currencies terms Rs 147 crore. This is close to 1% of revenue growth to expect from these products.

What should investors do?

The stock price falls when supply of stocks is more than the demand in the market (in short term). It looks some big investors are selling their position. Not necessary because of any material changes in the company, it could be also due to their re-balance activity.

We still believe Lupin Limited stock price is trading within its 2018 valuation zone. This means it is still good to accumulate if you are a long term investor. It is important not to forget that the lower band for Lupin is Rs 750, this is still down by 30% from its current price. So there might be more opportunities to come to accumulate at lower price.

At Rs 1,140 if your conviction level in this company is 100% then we recommended to have exposure of most 30% of your allocated money to it. You can increase your allocation now to 45% at Rs 1,060 price. This means, if you wanted to invest Rs 100,000 in this stock, you could have purchased Rs 30,000 worth at Rs 1,140 and increase your allocation to Rs 45,000 (extra Rs 15,000) more at Rs 1,060.

If your conviction level is intact then falling stock price is good news!