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For 3QFY2011, Lupin reported better-than-estimated results. Top-line growth of
17% was led by the formulations segment’s growth, majorly across the domestic
(growth of 16.2%) and Japan markets (growth of 16%). We maintain our
Accumulate view on the stock at these levels.
Strong results: Lupin reported net sales of `1,467cr (`1,255cr), up 17%, in line
with our estimates of `1,454cr. Sales in the advanced markets grew by 15% yoy
to `738cr (`643cr). OPM for the quarter came in at 17.3% (19.6%), lower than
our estimates of 19.4% due to higher other expenses at `445cr (`344.1cr), up
30%. Gross margins came in at 61.2% (59.2%) on the back of favourable
product mix and better realisations coupled with traction in the US generic
business. Lupin reported net profit of `224cr (`160.5cr), up 39.6%, driven by
lower interest charges as well as tax optimisation during the quarter.
Outlook and valuation: We expect net sales to grow at a 17.8% CAGR to
`6,579cr and earnings to grow at a 23.2% CAGR to `23.3/share over
FY2010–12E. Currently, the stock is trading at 22.6x and 18.1x FY2011E and
FY2012E earnings, respectively. We maintain our Accumulate recommendation
on the stock with a Target Price of `466.
Revenue growth continues, up 17%: Lupin reported net sales of `1,467cr
(`1,255cr), in line with our estimates of `1,454cr. Sales in the advanced markets
grew by 15% yoy to `738cr (`643cr), with total contribution of 50% to total sales.
The company launched Losartan tablets/Losartan HCTZ tablets and Imipramine
Hydrochloride tablets in the US during the quarter. The European market also
reported strong growth, particularly in France where the company launched
Trimetazidine and Clarothomycin XL during the quarter.
Japan, one of the key markets, reported sales growth of 16% to `173cr (`149cr).
Although sales in Japan were higher than our estimates, they could have been
better had the 10% price erosion across the generic market, driven by the
government policy, not affected net revenue.
On the regulatory front, Lupin filed five ANDAs, with the cumulative count standing
at 137; 47 ANDAs have been approved so far. The company also filed for its first
ophthalmic product during the quarter.
Concall takeaways
On Allernaze, management indicated that it is working across the different
facets, ensuring its launch in CY2011.
With respect to new growth avenues, Lupin has entered into the bio-similar
space with five products approved so far. Going ahead, management plans to
increase its focus on the same.
Lupin is expected to launch nearly 12 products in the US markets in FY2012,
of which 3–4 products would be from the oral contraceptive segment in US
having an approximate brand size of US $300mn–400mn in the US markets.
The company is targeting 30 ANDA filings in FY2011E.
In Japan, with the trend of 5–6 product launches per year, Lupin expects to
launch 3–4 products in 4QFY2011 as three products have been launched in
FY2011 till date. Management also indicated that a meaningful margin
expansion in Japan on the API front would start from early next year, whereas
margin expansion in the finished products segment would be from late next
year as the filings would begin in the next 3–4 months.
The current domestic field force count stands at 3,800, with 165 additions
during the quarter. The US branded sales force count stands at around 160
people.
Lupin is scouting for acquisition of brands across different therapeutic
segments to add value to its product portfolio, with pediatric being one of the
focus segments.
Recommendation rationale
US market – The key driver: The high-margin branded generic business has
been the key differentiator for Lupin in the Indian pharma space. The
company has further cemented its position in the segment by acquiring rights
for Antara product. With this, Lupin has been able to post higher sales of
US $127mn in FY2010, up 72% yoy, and higher OPM. Lupin now has a sales
force of 160 personnel in the US.
On the generic turf, Lupin is currently the fifth largest generic player in the US
in terms of prescriptions, with 22 out of its 25 products in the top-3 by market
share.
In the OC segment, Lupin has filed 22 ANDAs and expects to get approvals
from 2HFY2012. As per management, OC could contribute US $100mn to
the top line over the next 2–3 years.
As of 1HFY2011, the cumulative filings stood at 132, of which 45 have been
approved. Lupin plans to launch six products in the US in FY2011 and another
80 products over the next three years. Lupin now has 34 Para IV, of which 11
are FTFs (the company is the exclusive holder in three of them: Glumetza,
Fortamet and Cipro DS), addressing a market size of US $8bn.
Domestic formulations on a strong footing: Lupin continues to make strides in
the Indian market. Currently, Lupin ranks No.5, climbing up from being
No.11 six years ago. Lupin has been the fastest growing company among the
top-5 companies in the domestic formulation space, registering a strong
CAGR of 20.0% over the last three years. Six of Lupin's products are among
the top-300 brands in the country. Lupin introduced 42 new products in the
Indian market in FY2010 and has a strong field force of 3,700 MRs.
First mover advantage in Japan: With Kyowa’s acquisition in FY2008, Lupin
figures among the few Indian companies with a formidable presence in the
world’s second largest pharma market. The Japanese government has
introduced a new policy and regulatory reforms to increase the generic drugs’
contribution from a relatively low 17% in CY2007 to 30% of prescriptions by
CY2012. This is estimated to open up a US $10bn opportunity for global
generic players. We expect Lupin to post a 20% CAGR over FY2009–12E in
the Japanese market, and the region is likely to contribute 12% of its FY2012E
total sales.
Valuation: We expect net sales to grow at a 17.8% CAGR to `6,579cr and
earnings to grow at a 23.2% CAGR to `23.3/share over FY2010–12E. The
stock is currently trading at 22.6x and 18.1x FY2011E and FY2012E earnings,
respectively. We maintain our Accumulate recommendation on the stock with
a Target Price of `466.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin – 3QFY2011 Result Update
Angel Broking maintains a Accumulate on Lupin with a Target Price of Rs. 466
For 3QFY2011, Lupin reported better-than-estimated results. Top-line growth of
17% was led by the formulations segment’s growth, majorly across the domestic
(growth of 16.2%) and Japan markets (growth of 16%). We maintain our
Accumulate view on the stock at these levels.
Strong results: Lupin reported net sales of `1,467cr (`1,255cr), up 17%, in line
with our estimates of `1,454cr. Sales in the advanced markets grew by 15% yoy
to `738cr (`643cr). OPM for the quarter came in at 17.3% (19.6%), lower than
our estimates of 19.4% due to higher other expenses at `445cr (`344.1cr), up
30%. Gross margins came in at 61.2% (59.2%) on the back of favourable
product mix and better realisations coupled with traction in the US generic
business. Lupin reported net profit of `224cr (`160.5cr), up 39.6%, driven by
lower interest charges as well as tax optimisation during the quarter.
Outlook and valuation: We expect net sales to grow at a 17.8% CAGR to
`6,579cr and earnings to grow at a 23.2% CAGR to `23.3/share over
FY2010–12E. Currently, the stock is trading at 22.6x and 18.1x FY2011E and
FY2012E earnings, respectively. We maintain our Accumulate recommendation
on the stock with a Target Price of `466.
Revenue growth continues, up 17%: Lupin reported net sales of `1,467cr
(`1,255cr), in line with our estimates of `1,454cr. Sales in the advanced markets
grew by 15% yoy to `738cr (`643cr), with total contribution of 50% to total sales.
The company launched Losartan tablets/Losartan HCTZ tablets and Imipramine
Hydrochloride tablets in the US during the quarter. The European market also
reported strong growth, particularly in France where the company launched
Trimetazidine and Clarothomycin XL during the quarter.
Japan, one of the key markets, reported sales growth of 16% to `173cr (`149cr).
Although sales in Japan were higher than our estimates, they could have been
better had the 10% price erosion across the generic market, driven by the
government policy, not affected net revenue.
On the regulatory front, Lupin filed five ANDAs, with the cumulative count standing
at 137; 47 ANDAs have been approved so far. The company also filed for its first
ophthalmic product during the quarter.
OPM drops due higher other expenses: During the quarter, Lupin’s OPM declined
to 17.3% (19.6%), impacted by the 39.6% yoy increase in other expenses to
`44.3cr (`344.1cr). Gross margins came in at 61.2% (59.2%) on the back of
favourable product mix and better realisations coupled with traction in the US
generic business. Employee expenses during the quarter increased by 29.4% to
`197.7cr (`152.8cr), as the company expanded its sales force in the domestic and
US markets.
Concall takeaways
On Allernaze, management indicated that it is working across the different
facets, ensuring its launch in CY2011.
With respect to new growth avenues, Lupin has entered into the bio-similar
space with five products approved so far. Going ahead, management plans to
increase its focus on the same.
Lupin is expected to launch nearly 12 products in the US markets in FY2012,
of which 3–4 products would be from the oral contraceptive segment in US
having an approximate brand size of US $300mn–400mn in the US markets.
The company is targeting 30 ANDA filings in FY2011E.
In Japan, with the trend of 5–6 product launches per year, Lupin expects to
launch 3–4 products in 4QFY2011 as three products have been launched in
FY2011 till date. Management also indicated that a meaningful margin
expansion in Japan on the API front would start from early next year, whereas
margin expansion in the finished products segment would be from late next
year as the filings would begin in the next 3–4 months.
The current domestic field force count stands at 3,800, with 165 additions
during the quarter. The US branded sales force count stands at around 160
people.
Lupin is scouting for acquisition of brands across different therapeutic
segments to add value to its product portfolio, with pediatric being one of the
focus segments.
Recommendation rationale
US market – The key driver: The high-margin branded generic business has
been the key differentiator for Lupin in the Indian pharma space. The
company has further cemented its position in the segment by acquiring rights
for Antara product. With this, Lupin has been able to post higher sales of
US $127mn in FY2010, up 72% yoy, and higher OPM. Lupin now has a sales
force of 160 personnel in the US.
On the generic turf, Lupin is currently the fifth largest generic player in the US
in terms of prescriptions, with 22 out of its 25 products in the top-3 by market
share.
In the OC segment, Lupin has filed 22 ANDAs and expects to get approvals
from 2HFY2012. As per management, OC could contribute US $100mn to
the top line over the next 2–3 years.
As of 1HFY2011, the cumulative filings stood at 132, of which 45 have been
approved. Lupin plans to launch six products in the US in FY2011 and another
80 products over the next three years. Lupin now has 34 Para IV, of which 11
are FTFs (the company is the exclusive holder in three of them: Glumetza,
Fortamet and Cipro DS), addressing a market size of US $8bn.
Domestic formulations on a strong footing: Lupin continues to make strides in
the Indian market. Currently, Lupin ranks No.5, climbing up from being
No.11 six years ago. Lupin has been the fastest growing company among the
top-5 companies in the domestic formulation space, registering a strong
CAGR of 20.0% over the last three years. Six of Lupin's products are among
the top-300 brands in the country. Lupin introduced 42 new products in the
Indian market in FY2010 and has a strong field force of 3,700 MRs.
First mover advantage in Japan: With Kyowa’s acquisition in FY2008, Lupin
figures among the few Indian companies with a formidable presence in the
world’s second largest pharma market. The Japanese government has
introduced a new policy and regulatory reforms to increase the generic drugs’
contribution from a relatively low 17% in CY2007 to 30% of prescriptions by
CY2012. This is estimated to open up a US $10bn opportunity for global
generic players. We expect Lupin to post a 20% CAGR over FY2009–12E in
the Japanese market, and the region is likely to contribute 12% of its FY2012E
total sales.
Valuation: We expect net sales to grow at a 17.8% CAGR to `6,579cr and
earnings to grow at a 23.2% CAGR to `23.3/share over FY2010–12E. The
stock is currently trading at 22.6x and 18.1x FY2011E and FY2012E earnings,
respectively. We maintain our Accumulate recommendation on the stock with
a Target Price of `466.
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