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Lupin Limited (LUPN.BO; Rs438.00; 1L)
Takeaways from Mumbai — Lupin Ltd presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
What's new - Lupin does not expect the restrictions on Simva 80mg in the US to
impact materially, as most of the revenues come from the 20mg dosage form. There
could be some hit once Lipitor goes generic, but it is likely be priced higher than
Simva generic. Aerochamber Plus is unlikely to be launched in the near term but
other branded products continue to do well.
US biz to be key growth driver - Most of Lupin's pending generic ANDAs (c60-70
out of c100) are likely to mature over the next 3-4 years, implying a significant
product rollout phase on a base of 30 odd products. Fortamet, Lotrel higher strength
& Geodon are key near-term catalysts. OCs would remain a good opportunity
despite more competition than envisaged earlier. Besides, it intends to maintain US
branded revenues in the c30% (of US biz) range through a combination of its own
launches and acquisitions.
Japan & India to add to momentum - Lupin expects growth in India to sustain in
the c18-20% range, on the back of new launches and greater penetration. Japan is
the other market with potential, as the government's efforts to increase generic
penetration gain traction. Lupin has several launches planned and is also working
on backending API sourcing to India - leading to growth with improving margins
(currently below corporate average, despite better pricing).
Acquisitions, an integral part of growth strategy - as Lupin aims to get to
US$3bn revenues by 2013. Potential targets include interesting branded
opportunities in the US, market access vehicles in emerging markets such as Brazil,
Turkey etc., or even something to strengthen its presence in one of its key markets.
While the ticket size of acquisitions could go up, the focus on RoI and strategic fit
would remain paramount.
Lupin
(LUPN.BO; Rs438.00; 1L)
Valuation
Given that pharma is a growth sector, we use P/E as our primary method to value
the base business of pharma companies. Lupin has historically (last six to seven
years) traded in a band of 10-34x one-year forward earnings. We value Lupin at 20x
12m forward earnings, in line with the sector leaders such as Cipla, Dr Reddy’s &
Sun Pharma due to its leadership in key markets/products & robust financial
metrics. At 20x Mar12E recurring FDEPS, we arrive at a target price of Rs 500.
Risks
We rate Lupin Low Risk, inline with the recommendation of our quantitative riskrating
system, which tracks 260-day historical share price volatility. Key downside
risks to achieving our target price include: 1) Earlier than expected Generic
competition in Suprax (c8% of FY10 sales); 2) INR appreciation would hurt, given its
exposure to global markets; 3) Reasonable exposure to the domestic formulations
market (29% of sales) leaves Lupin vulnerable to any significant widening of the
price control net. 4) Inability to effectively scale up the Kyowa operations or Antara
sales.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin Limited (LUPN.BO; Rs438.00; 1L)
Takeaways from Mumbai — Lupin Ltd presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
What's new - Lupin does not expect the restrictions on Simva 80mg in the US to
impact materially, as most of the revenues come from the 20mg dosage form. There
could be some hit once Lipitor goes generic, but it is likely be priced higher than
Simva generic. Aerochamber Plus is unlikely to be launched in the near term but
other branded products continue to do well.
US biz to be key growth driver - Most of Lupin's pending generic ANDAs (c60-70
out of c100) are likely to mature over the next 3-4 years, implying a significant
product rollout phase on a base of 30 odd products. Fortamet, Lotrel higher strength
& Geodon are key near-term catalysts. OCs would remain a good opportunity
despite more competition than envisaged earlier. Besides, it intends to maintain US
branded revenues in the c30% (of US biz) range through a combination of its own
launches and acquisitions.
Japan & India to add to momentum - Lupin expects growth in India to sustain in
the c18-20% range, on the back of new launches and greater penetration. Japan is
the other market with potential, as the government's efforts to increase generic
penetration gain traction. Lupin has several launches planned and is also working
on backending API sourcing to India - leading to growth with improving margins
(currently below corporate average, despite better pricing).
Acquisitions, an integral part of growth strategy - as Lupin aims to get to
US$3bn revenues by 2013. Potential targets include interesting branded
opportunities in the US, market access vehicles in emerging markets such as Brazil,
Turkey etc., or even something to strengthen its presence in one of its key markets.
While the ticket size of acquisitions could go up, the focus on RoI and strategic fit
would remain paramount.
Lupin
(LUPN.BO; Rs438.00; 1L)
Valuation
Given that pharma is a growth sector, we use P/E as our primary method to value
the base business of pharma companies. Lupin has historically (last six to seven
years) traded in a band of 10-34x one-year forward earnings. We value Lupin at 20x
12m forward earnings, in line with the sector leaders such as Cipla, Dr Reddy’s &
Sun Pharma due to its leadership in key markets/products & robust financial
metrics. At 20x Mar12E recurring FDEPS, we arrive at a target price of Rs 500.
Risks
We rate Lupin Low Risk, inline with the recommendation of our quantitative riskrating
system, which tracks 260-day historical share price volatility. Key downside
risks to achieving our target price include: 1) Earlier than expected Generic
competition in Suprax (c8% of FY10 sales); 2) INR appreciation would hurt, given its
exposure to global markets; 3) Reasonable exposure to the domestic formulations
market (29% of sales) leaves Lupin vulnerable to any significant widening of the
price control net. 4) Inability to effectively scale up the Kyowa operations or Antara
sales.
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