Nomura Financial Advisory and Securities has downgraded Lupin to 'Neutral' with target price of Rs 1,661 as against current market price (CMP) of Rs 1,900 in its report.

Commenting on the investment rationale, Nomura said, ''LPC's US generic sales have recorded a CAGR of 32% over FY12-15, with an average annual increase in sales of USD 160 million. We expect, the average annual increase to sustain at these levels over FY16-17F, implying a slower growth rate on a larger base.

We expect key ANDA approvals, launches (Nexium, Welchol, Renvela, Glumetza) in FY16F. However, any upside from new launches will likely be negated by; a) erosion in some high-value products such as Fortamet, which contributes14% of FY15 generic sales; and b) pricing pressure due to customer consolidation.''

''We expect LPC's US brand business sales to fall to USD 52 million in FY16F, from USD 145 million in FY12. The earlierthan-expected generic competition for Suprax and Antara has been a negative surprise. LPC may pursue acquisition to scale up the brand business near term. An acquisition may be marginally earnings accretive in the near term. However, we are less certain of considerable value accretion.

We retain our valuation multiple at 23x FY17E to arrive at our target price of Rs 1,661. LPC is up 33%YTD vs a 4% rise in the Sensex. The valuation multiple, now at 32x one-year fwd earnings, could correct as growth slows,'' in Nomura's view.

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