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Domestic formulations growth to outpace industry
Lupin Pharma’s (LPC) domestic growth has consistently outpaced the broad
market and peers over the past five years—domestic growth has been a sturdy
24% (CAGR) over FY05-10. This is further evident through our extensive
distributor survey, which validates LPC’s strong domestic franchise led by wider
therapy coverage (chronic 41% of total sales), strong traction from new
launches, and effective field force. We expect the company’s growth momentum
to sustain in the domestic market and estimate 18% CAGR over FY11-13E.
Higher API sourcing from India to boost Japan margins
LPC has guided to 15-16% growth driven by 8-10 products launches in FY12E.
We believe Japan’s contribution to margins will be far higher as the company
expects to source more products from India (out of the 8-10 product launches,
four-five will be sourced from India). Management expects margins from Japan
to expand 600 bps to 24-25% over FY13-14E.
Strong ANDA pipeline in US imparts strong growth visibility
LPC’s solid base in US generics (USD 350 mn) with a large pending pipeline of 90
products (50-60 ANDA approvals expected in next 2-3 years) including niche
segments such as OC, ophthalmology as well as Para IV (13 FTFs with four being
exclusive), imparts long-term growth visibility. However, there could be some
pressures in the near term, largely due to genericization of Lotrel and delay in
launches of OCs (2-3 launches by end FY12).
Execution slippage in US branded formulations poses key risk
US branded formulations faces key challenge of possible genericization of Antara
and Suprax, although management is confident of mitigating these risks through
effective product life cycle management. Further, with no visible product pipeline
and expected delay in launch of Allernaze (FY13E), we expect a moderate 11%
CAGR in US branded formulations over FY11-13E.
Outlook and valuations: Strong execution play; maintain ‘BUY’
We remain positive on LPC due to its strong execution track record, established
franchise in domestic market, and earnings growth visibility, imparting strong
upsides from current valuations. It is our preferred pick in the large cap space.
We re-iterate ‘BUY/Sector outperformer’ rating with TP of INR 500.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Domestic formulations growth to outpace industry
Lupin Pharma’s (LPC) domestic growth has consistently outpaced the broad
market and peers over the past five years—domestic growth has been a sturdy
24% (CAGR) over FY05-10. This is further evident through our extensive
distributor survey, which validates LPC’s strong domestic franchise led by wider
therapy coverage (chronic 41% of total sales), strong traction from new
launches, and effective field force. We expect the company’s growth momentum
to sustain in the domestic market and estimate 18% CAGR over FY11-13E.
Higher API sourcing from India to boost Japan margins
LPC has guided to 15-16% growth driven by 8-10 products launches in FY12E.
We believe Japan’s contribution to margins will be far higher as the company
expects to source more products from India (out of the 8-10 product launches,
four-five will be sourced from India). Management expects margins from Japan
to expand 600 bps to 24-25% over FY13-14E.
Strong ANDA pipeline in US imparts strong growth visibility
LPC’s solid base in US generics (USD 350 mn) with a large pending pipeline of 90
products (50-60 ANDA approvals expected in next 2-3 years) including niche
segments such as OC, ophthalmology as well as Para IV (13 FTFs with four being
exclusive), imparts long-term growth visibility. However, there could be some
pressures in the near term, largely due to genericization of Lotrel and delay in
launches of OCs (2-3 launches by end FY12).
Execution slippage in US branded formulations poses key risk
US branded formulations faces key challenge of possible genericization of Antara
and Suprax, although management is confident of mitigating these risks through
effective product life cycle management. Further, with no visible product pipeline
and expected delay in launch of Allernaze (FY13E), we expect a moderate 11%
CAGR in US branded formulations over FY11-13E.
Outlook and valuations: Strong execution play; maintain ‘BUY’
We remain positive on LPC due to its strong execution track record, established
franchise in domestic market, and earnings growth visibility, imparting strong
upsides from current valuations. It is our preferred pick in the large cap space.
We re-iterate ‘BUY/Sector outperformer’ rating with TP of INR 500.
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