Thursday, August 9, 2012

>LUPIN: Plans to launch 9-10 oral contraceptive

Robust quarter

Lupin’s results for Q1FY13 were better than our expectations. The company reported 44%YoY growth in revenues, 150bps improvement in EBIDTA margin and 34%YoY growth in net profit. Sales growth was across all major geographies. Notably among them were: 63% YoY growth in the US market and 100%YoY growth in the Japanese market due to the acquisition of I’rom. Lupin is likely to benefit from the $170bn (Rs9,350bn) patent expiry opportunity till 2015. The company’s 20 out of 42 generic products are market leaders in the US. Lupin has entered the
US generic market in oral contraceptive (OC) segment with a range of products. We have a Buy rating on the scrip with a revised target price of Rs699 (based on 22x FY14E EPS) from the earlier target price of Rs635 (based on 20x FY14E EPS).

Excellent sales growth: Lupin reported 44% YoY growth in revenues from Rs15.68bn to Rs22.54bn due to excellent growth in major markets and benefit of rupee depreciation against the dollar. The sales growth in various geographies was, India formulations 25%, US formulations 63%, Europe 14%, Japan 100% (due to the acquisition of I’rom), S. Africa 13% and RoW 54%.  Strong growth in US revenues: Lupin has achieved 63%YoY growth in revenues from Rs4.93bn to Rs8.02bn due to the launch of Suprax 400mg capsules and generic ziprasidone in the US generic market during the quarter. Lupin is the market leader in 20 out of 42 products in the US generic market. The company is likely to benefit from its oral contraceptive (OC) segment portfolio in the US market.

Improvement in margin: Lupin’s EBIDTA margin improved by 150bps from 18.8% to 20.3% mainly due to the reduction in material cost. Material cost declined by 310bps from 39.4% to 36.3% of total revenues due to the change in product mix with higher sales in US market.

Leading player in OC segment: Lupin has plans to launch 9-10 oral contraceptive (OC) products in the US market in FY13. The company has filed 21 ANDAs with US FDA and the addressable market size is ~$4bn (Rs220bn).

Valuations: We expect Lupin to benefit from the strong global generic business in US, Japan and other emerging markets. The company is likely to benefit from excellent growth in the domestic market. At the CMP of Rs586, the stock trades at 22.8x FY13E EPS of Rs25.7 and 18.4x FY14E EPS of Rs31.8. We have a Buy rating on the scrip with a revised target price of Rs699 (based on 22x FY14E base EPS of Rs31.8) from our earlier target of Rs635 (based on 20x FY14E EPS).