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UBS Investment Research
Lupin Limited
Q 1FY12: Inline, but muted commentary
Event: Sales ahead, but EBITDA inline and PAT below UBS-e
While Q1FY12 sales was ahead of UBS-e of Rs 15bn driven by strong growth in
Japan and ROW markets. U.S sales were up only 6%YoY due to pricing pressure
in Lotrel and degrowth of Antara and Aerochamber brands. EBITDA margin were
weaker due to higher staff and other expenses as Indore SEZ ramps up. PAT was
Rs 2.1bn (+7%YoY) vs UBS-e of Rs 2.24bn.
Impact: Modest growth in the near term
Mgmt. expects to maintain 20%YoY growth in India in FY12. In US, Co. has
managed to capture 35% market share in Levofloxacin, however, pricing erosion is
fairly high due to competition. Mgmt. expects to launch 3-4 O.C. products (incl.
Femcon AG) in H2 in the US. US branded business continues to be sluggish with
no clear timelines for Allernaze launch. Mgmt. continues to look for potential
acquisition targets in the US specialty space.
Action: Maintain Buy rating, M&A key trigger in near term
While we expect earnings growth to remain muted for the next couple of quarters,
we maintain our Buy on the stock given the strong pipeline in the US (with over
100 ANDAs) and strong execution in other key markets. We believe acquisitions
in emerging markets and US specialty could be a potential trigger in the near term.
Valuation: Maintain Buy rating, Price target of Rs 530
We derive our price target using DCF-based methodology, explicitly forecasting
long-term valuation drivers with UBS’s VCAM tool and a WACC of 11%.
Lupin Limited
Incorporated in 1968, Lupin is an India-based pharmaceutical
company focused on the manufacture and global marketing of finished
dosages and active pharmaceutical ingredients (APIs). Lupin is the
eighth largest company in the domestic market and is the largest
Indian company in the US based on TRx. Lupin is also increasing its
presence in Japan and Europe. FY10 revenue was Rs47.4bn, with 19%
derived from global API sales, 28% from Indian finished dosages,
35% from US finished dosages and 18% from RoW and Japan
finished dosages.
Statement of Risk
Key risk for Speciality business is erosion of the business due to
generic substitution. We believe risks include regulatory risks, FDA
approval, timing of approvals, litigation (including the appeal
process), accounting/disclosure, and product pricing risk from
generics competition. Pricing pressure in the US market remains high.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Lupin Limited
Q 1FY12: Inline, but muted commentary
Event: Sales ahead, but EBITDA inline and PAT below UBS-e
While Q1FY12 sales was ahead of UBS-e of Rs 15bn driven by strong growth in
Japan and ROW markets. U.S sales were up only 6%YoY due to pricing pressure
in Lotrel and degrowth of Antara and Aerochamber brands. EBITDA margin were
weaker due to higher staff and other expenses as Indore SEZ ramps up. PAT was
Rs 2.1bn (+7%YoY) vs UBS-e of Rs 2.24bn.
Impact: Modest growth in the near term
Mgmt. expects to maintain 20%YoY growth in India in FY12. In US, Co. has
managed to capture 35% market share in Levofloxacin, however, pricing erosion is
fairly high due to competition. Mgmt. expects to launch 3-4 O.C. products (incl.
Femcon AG) in H2 in the US. US branded business continues to be sluggish with
no clear timelines for Allernaze launch. Mgmt. continues to look for potential
acquisition targets in the US specialty space.
Action: Maintain Buy rating, M&A key trigger in near term
While we expect earnings growth to remain muted for the next couple of quarters,
we maintain our Buy on the stock given the strong pipeline in the US (with over
100 ANDAs) and strong execution in other key markets. We believe acquisitions
in emerging markets and US specialty could be a potential trigger in the near term.
Valuation: Maintain Buy rating, Price target of Rs 530
We derive our price target using DCF-based methodology, explicitly forecasting
long-term valuation drivers with UBS’s VCAM tool and a WACC of 11%.
Lupin Limited
Incorporated in 1968, Lupin is an India-based pharmaceutical
company focused on the manufacture and global marketing of finished
dosages and active pharmaceutical ingredients (APIs). Lupin is the
eighth largest company in the domestic market and is the largest
Indian company in the US based on TRx. Lupin is also increasing its
presence in Japan and Europe. FY10 revenue was Rs47.4bn, with 19%
derived from global API sales, 28% from Indian finished dosages,
35% from US finished dosages and 18% from RoW and Japan
finished dosages.
Statement of Risk
Key risk for Speciality business is erosion of the business due to
generic substitution. We believe risks include regulatory risks, FDA
approval, timing of approvals, litigation (including the appeal
process), accounting/disclosure, and product pricing risk from
generics competition. Pricing pressure in the US market remains high.
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