Lupin just came out with good first quarter 2017 results. They look like this:

Lupin Q1 – 2017 Q4 – 2016 Q1 – 2016 % change Q-Q % change Y-Y
Total Income 4,439.41 4,170.73 3,156.06 6.44% 40.66%
EBIT 1,187.94 1,191.17 799.16 -0.27% 48.65%
EBIT margin 26.76% 28.56% 25.32% -1.80 Bpt 1.44%
Net Profit 882.55 751.14 566.31 17.49% 55.84%

 

Looking at the above results, as media is putting across that they missed on the margins expectation. But up-tick in its margin on year-to-year basis is still a very healthy sign for the business. Overall, market was expecting its profits for 2017 around Rs 3,910 crore. But after its first quarter results, it highly looks very less chances to come close to those profits expectations.

However, the analysts’ spectrum of profitability for 2017 is in range of Rs 2,275 – Rs 3,520 crore for 2017. It still looks that they will meet the expectations of analysts on the upper band. If we punch in those profits expectations by analysts, we come to its intrinsic value spectrum of Rs 561 – Rs 1,380 per share.

It is important to understand here that, we are not forecasting that prices of Lupin will fall down to Rs 1,380 levels. But if you are looking to invest in this business today, then you are buying these stocks at premium valuations.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.