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LUPIN: BUY, TP-Rs537 (27% upside)
What’s the theme?
Lupin is one of the best plays in the pharma space, given its strong execution capabilities, improving
financial performance and diversifying business model. The high-margin branded generic business has
been the key differentiator. Strong growth on the US front (both branded generic and generic segments)
and improvement in operating margins would maintain the growth momentum.
What will move the stock?
1) Strong traction in the high-margin Suprax product (chewable tablets approved; double strength tablets
now enjoy more than 50% of total Suprax prescription share) and gradual pick up in Antara prescription.
2) Approval of less competitive OC products (generic market size of >US$ 1bn) in 2HFY2012 and launch
of 10-12 generic products (other than OC) in next 12 months. 3) Commencement of API supplies from
Goa facility to Kyowa to boost margins. 4) Given its strong balance sheet, we can expect Lupin to choose
inorganic growth (Latam market, US branded generic the key target segments).
Where are we stacked versus consensus?
Our FY2012 estimates are higher than consensus. We expect net sales and earnings to log CAGR of
20.6% and 26.2% to Rs 68,956mn and Rs24.4 over FY2010-12 respectively. We value the company at
22x (in line with the big players in the sector) FY12 earnings yielding a TP of Rs537.
What will challenge our target price?
1) Earlier-than-expected competition in Suprax. 2) Further delay in OC generic product approvals impacting
our estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
LUPIN: BUY, TP-Rs537 (27% upside)
What’s the theme?
Lupin is one of the best plays in the pharma space, given its strong execution capabilities, improving
financial performance and diversifying business model. The high-margin branded generic business has
been the key differentiator. Strong growth on the US front (both branded generic and generic segments)
and improvement in operating margins would maintain the growth momentum.
What will move the stock?
1) Strong traction in the high-margin Suprax product (chewable tablets approved; double strength tablets
now enjoy more than 50% of total Suprax prescription share) and gradual pick up in Antara prescription.
2) Approval of less competitive OC products (generic market size of >US$ 1bn) in 2HFY2012 and launch
of 10-12 generic products (other than OC) in next 12 months. 3) Commencement of API supplies from
Goa facility to Kyowa to boost margins. 4) Given its strong balance sheet, we can expect Lupin to choose
inorganic growth (Latam market, US branded generic the key target segments).
Where are we stacked versus consensus?
Our FY2012 estimates are higher than consensus. We expect net sales and earnings to log CAGR of
20.6% and 26.2% to Rs 68,956mn and Rs24.4 over FY2010-12 respectively. We value the company at
22x (in line with the big players in the sector) FY12 earnings yielding a TP of Rs537.
What will challenge our target price?
1) Earlier-than-expected competition in Suprax. 2) Further delay in OC generic product approvals impacting
our estimates.
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