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Pick up in second half
Branded formulations, both in domestic and emerging markets, grew
strongly for Lupin in 1Q while weak growth in the US generics was a
negative surprise. Despite strong branded formulations growth, Ebitda
margins remain under pressure due to recent commissioning of Indore
SEZ and a lower proportion of US branded business. The management
guides for strong second half based on product launches in the US.
Branded generics growth momentum strong; US business weak
q Lupin’s net sales grew 18% YoY in 1QFY12 led by strong growth in domestic
formulations (chronic therapies doing well) and encouraging performance across
branded emerging markets.
q Growth in Japan has been pretty encouraging though remember that due to
pricing cuts in same quarter last year the base was low.
q Growth in the US business was weak at 7% YoY due to a high base in generics
(Lotrel) and declining trend in branded segment. While US generics growth will
pick up as we launches towards 2HFY12, branded segment growth is unlikely to
pick up. We expect the company to bolster this segment via acquisitions. We
continue see this as a high risk segment (high redundancy costs).
q In the US, the company has filed 4 ANDAs during the quarter and received 4
approvals. The company plans to launch 8-10 products this year out of which they
have launched 2 already. Four out of these would be OCs. The management
guides for 10-15 OCs in market by 2HFY13 out of total 25-30 OC filed.
Ebitda margins stable sequentially, down YoY
q Gross margins came down on a YoY and QoQ basis due to high margin
opportunities in the base and decline in proportion of US branded business.
q Addition of field force to bolster sales in branded segment has been one of reasons
for staff costs going up. The company is attempting to improve its utilisation.
q R&D costs were lower QoQ and flat YoY, though the company guides for a pick up
in coming quarters. Part of income (US$1.5m) from Salix deal done in Apr 2011
(US$10m total income) has been booked in this quarter.
Reasonable valuations, expect US generics to pick up in second half
q Lupin’s Indore SEZ commissioned recently. We expect margin pressures to sustain
during coming quarters. Due to rise in tax rate in FY12 to 15%+ from c. 12% in
FY11 net profit growth is likely to be impacted.
q Recent deal with Medicis where Lupin received US$20m helps earnings in 2Q and
boosts reported profits for FY12.
q 2HFY12 will see a strong pick up led by approval of generic versions of Femcon,
Tramadol and Geodon
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pick up in second half
Branded formulations, both in domestic and emerging markets, grew
strongly for Lupin in 1Q while weak growth in the US generics was a
negative surprise. Despite strong branded formulations growth, Ebitda
margins remain under pressure due to recent commissioning of Indore
SEZ and a lower proportion of US branded business. The management
guides for strong second half based on product launches in the US.
Branded generics growth momentum strong; US business weak
q Lupin’s net sales grew 18% YoY in 1QFY12 led by strong growth in domestic
formulations (chronic therapies doing well) and encouraging performance across
branded emerging markets.
q Growth in Japan has been pretty encouraging though remember that due to
pricing cuts in same quarter last year the base was low.
q Growth in the US business was weak at 7% YoY due to a high base in generics
(Lotrel) and declining trend in branded segment. While US generics growth will
pick up as we launches towards 2HFY12, branded segment growth is unlikely to
pick up. We expect the company to bolster this segment via acquisitions. We
continue see this as a high risk segment (high redundancy costs).
q In the US, the company has filed 4 ANDAs during the quarter and received 4
approvals. The company plans to launch 8-10 products this year out of which they
have launched 2 already. Four out of these would be OCs. The management
guides for 10-15 OCs in market by 2HFY13 out of total 25-30 OC filed.
Ebitda margins stable sequentially, down YoY
q Gross margins came down on a YoY and QoQ basis due to high margin
opportunities in the base and decline in proportion of US branded business.
q Addition of field force to bolster sales in branded segment has been one of reasons
for staff costs going up. The company is attempting to improve its utilisation.
q R&D costs were lower QoQ and flat YoY, though the company guides for a pick up
in coming quarters. Part of income (US$1.5m) from Salix deal done in Apr 2011
(US$10m total income) has been booked in this quarter.
Reasonable valuations, expect US generics to pick up in second half
q Lupin’s Indore SEZ commissioned recently. We expect margin pressures to sustain
during coming quarters. Due to rise in tax rate in FY12 to 15%+ from c. 12% in
FY11 net profit growth is likely to be impacted.
q Recent deal with Medicis where Lupin received US$20m helps earnings in 2Q and
boosts reported profits for FY12.
q 2HFY12 will see a strong pick up led by approval of generic versions of Femcon,
Tramadol and Geodon
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