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Action: We maintain Buy as earnings momentum picks up
Over the past 12 months, consensus FY12/FY13 earnings estimates have
come off by 5%, primarily due to the lack of new launches. We expect the
earnings momentum to pick up from here onwards with potential consensus
earnings upgrades through the next 12 months. The earnings upgrade is
likely to be driven by US opportunities. With the commencement of oral
contraceptive (OC) approvals, we expect the launch momentum to
accelerate. OCs along with low competition in the US should help improve
margins. We expect growth in India to remain ahead of the market.
Overall, we estimate revenue and earnings CAGR at 20% and 22.5%,
respectively, over FY12F-14F. Lupin is a combined play on the opportunity
in the US, India and Japan with significant execution track record so far.
Catalysts
US product approvals and earnings surprises on higher revenue and
margin in the US portfolio and value accretive acquisitions.
Valuations
We retain Buy and raise our 12m target price to INR576 from INR570,
based on 20x one-year forward earnings. Our valuation multiple is in line
with the current trading multiple. Key risks to our call are: a) generic
competition in Suprax; b) substantial fall in the sales of key products in the
US such as Simvastatin (on generic atorvastatin approval); and c)
regulatory changes including price control in key markets such as India
and Japan. We incorporate some of the risks in our estimates and take
comfort from the fact that any further downside could be compensated
from potential upside from new US launches.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Action: We maintain Buy as earnings momentum picks up
Over the past 12 months, consensus FY12/FY13 earnings estimates have
come off by 5%, primarily due to the lack of new launches. We expect the
earnings momentum to pick up from here onwards with potential consensus
earnings upgrades through the next 12 months. The earnings upgrade is
likely to be driven by US opportunities. With the commencement of oral
contraceptive (OC) approvals, we expect the launch momentum to
accelerate. OCs along with low competition in the US should help improve
margins. We expect growth in India to remain ahead of the market.
Overall, we estimate revenue and earnings CAGR at 20% and 22.5%,
respectively, over FY12F-14F. Lupin is a combined play on the opportunity
in the US, India and Japan with significant execution track record so far.
Catalysts
US product approvals and earnings surprises on higher revenue and
margin in the US portfolio and value accretive acquisitions.
Valuations
We retain Buy and raise our 12m target price to INR576 from INR570,
based on 20x one-year forward earnings. Our valuation multiple is in line
with the current trading multiple. Key risks to our call are: a) generic
competition in Suprax; b) substantial fall in the sales of key products in the
US such as Simvastatin (on generic atorvastatin approval); and c)
regulatory changes including price control in key markets such as India
and Japan. We incorporate some of the risks in our estimates and take
comfort from the fact that any further downside could be compensated
from potential upside from new US launches.
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