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Lupin Limited
Outlook firm despite weak
branded biz; Buy
Cut forecasts and PO
We lower our FY12-13E EPS estimates by 4-7% and accordingly lower our PO by
4% to Rs465 (vs Rs480). This is led by lower sales estimates for US branded
business, particularly (a) slower ramp-up of Antara & (b) further delays in
Allernaze launch. However, this would be partially offset by (a) inclusion of two
key products Fortamet and Geodon (exclusivities) in our US generics forecasts &
(b) income from Salix (rifaximin deal, US$10mn upfront plus regular milestones).
Branded business assumptions lowered
We cut our US branded sales growth estimates to 6% CAGR over FY11-13E vs
20% earlier. This is largely due to (a) Lower sales forecasts for Antara to
US$50mn peak sales by FY13E (vs US$70mn earlier) due to sluggish ramp-up
and threat from generic Tricor (Sep-11); (b) push back of Allernaze launch from
1HFY12E to late FY12 now. We now expect branded business to form 26% of US
business (vs 30% earlier).
US generics growth supported by niche launches
We have raised our US generic sales forecasts 3-6% over FY12-13E primarily to
include two exclusivity opportunities (a) Fortamet (US$70mn, sole FTF, metformin
XR) launch in June-11 and (b) Geodon (US$850mn, shared FTF, ziprasidone)
launch in Mar-12. We expect US generics business to grow at 31% over FY11-
13E driven to 12-15 new launches annually including 3 OC products by end FY12.
OC foray on track
We expect launches from OC (oral contraceptives) portfolio (28 filed so far) by
end-FY12E to sustain strong march in generics business. We expect OC
launches to commence by end-FY12E with 2-3 products in the last quarter.
Subsequent ramp-up would enable the company to tap US$1.7bn potential OC
generic market opportunity.
Price objective basis & risk
Lupin Limited (LPMCF)
Our PO of Rs465 is based on 20x FY12E EPS, which is at par with large pharma
peers average. We expect the multiple to expand, compared to both historical
and mid-cap companies, closer to large cap peers, We believe the stock should
trade at a higher multiple due to: (1) stronger and sustainable growth rates (21%
sales CAGR, 24% Profit CAGR), and (2) scale of operations. At our PO, the stock
would trade at 14.6x EV/EBITDA FY12E, lower than the existing FY11E multiple.
Downside risks: (1) earlier than expected competition in US brands (Suprax) (2)
slower approval from USFDA affecting US growth and (3) higher-than-expected
price erosion.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin Limited
Outlook firm despite weak
branded biz; Buy
Cut forecasts and PO
We lower our FY12-13E EPS estimates by 4-7% and accordingly lower our PO by
4% to Rs465 (vs Rs480). This is led by lower sales estimates for US branded
business, particularly (a) slower ramp-up of Antara & (b) further delays in
Allernaze launch. However, this would be partially offset by (a) inclusion of two
key products Fortamet and Geodon (exclusivities) in our US generics forecasts &
(b) income from Salix (rifaximin deal, US$10mn upfront plus regular milestones).
Branded business assumptions lowered
We cut our US branded sales growth estimates to 6% CAGR over FY11-13E vs
20% earlier. This is largely due to (a) Lower sales forecasts for Antara to
US$50mn peak sales by FY13E (vs US$70mn earlier) due to sluggish ramp-up
and threat from generic Tricor (Sep-11); (b) push back of Allernaze launch from
1HFY12E to late FY12 now. We now expect branded business to form 26% of US
business (vs 30% earlier).
US generics growth supported by niche launches
We have raised our US generic sales forecasts 3-6% over FY12-13E primarily to
include two exclusivity opportunities (a) Fortamet (US$70mn, sole FTF, metformin
XR) launch in June-11 and (b) Geodon (US$850mn, shared FTF, ziprasidone)
launch in Mar-12. We expect US generics business to grow at 31% over FY11-
13E driven to 12-15 new launches annually including 3 OC products by end FY12.
OC foray on track
We expect launches from OC (oral contraceptives) portfolio (28 filed so far) by
end-FY12E to sustain strong march in generics business. We expect OC
launches to commence by end-FY12E with 2-3 products in the last quarter.
Subsequent ramp-up would enable the company to tap US$1.7bn potential OC
generic market opportunity.
Price objective basis & risk
Lupin Limited (LPMCF)
Our PO of Rs465 is based on 20x FY12E EPS, which is at par with large pharma
peers average. We expect the multiple to expand, compared to both historical
and mid-cap companies, closer to large cap peers, We believe the stock should
trade at a higher multiple due to: (1) stronger and sustainable growth rates (21%
sales CAGR, 24% Profit CAGR), and (2) scale of operations. At our PO, the stock
would trade at 14.6x EV/EBITDA FY12E, lower than the existing FY11E multiple.
Downside risks: (1) earlier than expected competition in US brands (Suprax) (2)
slower approval from USFDA affecting US growth and (3) higher-than-expected
price erosion.
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