Stock investment update: Ace investor Rakesh Jhunjhunwala removes money in this pharma-major - What should you do?

The big bull of Dalal Street aka Rakesh Jhunjhunwala is in fiery mode, as he has removed his money from various stocks in December 2018 (Q3FY19) quarter. After reducing his holding in stocks like Firstsource Solutions, Rallis India and Autoline Industries, the Warren Buffett of India has once again offloaded his money from pharma-major Lupin. The share price of Lupin, however, is trading at Rs 865 per piece gradually above Rs 2.45 or 0.28% on BSE at around 1130 hours. 

Although, the ace investor has removed his money in Lupin on a marginal basis in Q3FY19, what is interesting to know is that this would be his second selling in this company. This brings a cautious sentiment for investors, considering many would wonder whether Jhunjhunwala has lost faith in Lupin.

As on December 2018, Jhunjhunwala has cut his holding in Lupin by 0.02%, taking his overall stake now at 1.77% with 8,023,605 equity shares worth Rs 688.4 crore. 

Jhunjhunwala in September 2018 quarter, removed about 0.16% of his stake in Lupin. This was interesting, considering he bought an extra 0.03% stake in this pharma company just in June 2018 quarter. 

It needs to be noted that, from September month till the end of December 2018, the benchmark indices have witnessed massive price correction and hence some heat was also borne in Lupin shares. 

According to TrendLyne.com, Jhunjhunwala took no profit home from investment in Lupin shares, as the company dropped by 10.06% in the year. 

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Should you buy Lupin shares?

Talking about Q3FY19 result, analysts at HDFC Securities said, "Revenue growth will remain subdued, both YoY and QoQ (+1- 1.5%), due to lower sales in the US and softer growth in the
domestic market.EBITDA margin will likely be at ~15%, falling 230bps YoY due to higher specialty spend and erosion in the Metformin franchise."

Such performance in Q3FY19 result could lead to a more volatile response in Lupin shares ahead. 

However, HDFC Securities has still given it a buy rating on Lupin with a price target of Rs 1,125 ahead. 

On the other hand, Sharekhan in its note said, "Management has indicated that remediation at two plants under the Warning Letter will be completed in a few months and, thereafter, USFDA shall be invited for re-inspection. Since there are two facilities under the Warning
Letter, there is a chance that both need resolution for the letter to be lifted."

Analysts at Sharekhan added, "We feel Lupin could face few more tough quarters as pricing pressure is likely to continue along with the risk of competition in key products such as Minastrin, fortamet and glumetza and delay in key product approvals (25-30% of products are filed from two facilities under the warning letter)."

Hence, Sharekhan expects U.S. business sales recovery to take time and operating margins for FY2019 to remain at 19-21% depending upon product approval and launch timeline.

Following which, Sharekhan has reduced its target for Lupin without any price target.