Lupin - Q4FY13 Result Update - Centrum

Q4FY13 Result Update/Estimate Change

Lupin

Rating: Buy

Target Price: Rs925

CMP: Rs731

Upside: 26.5%

On high growth trajectory

Lupin’s Q4FY13 results were above our expectations. The company reported a growth of 34%YoY in revenues, 610bps in EBIDTA margin and 162%YoY in net profit. Lupin has reported excellent growth of 43% in the domestic market and 49% in US & European markets. However, the company reported a lower growth of 2% in the Japanese market. We expect the growth momentum to be maintained from new product introductions in the US and domestic markets. The management expects 75-100bps margin improvement annually. We have revised our FY14 and FY15 estimates upward by 17% and 21% respectively. We have a Buy rating for the company with a revised target price of Rs925 (based on 22x Sept’14 EPS of Rs42.1).

m  Strong growth across geographies: Lupin reported 34%YoY growth in revenues from Rs19.24bn to Rs25.86bn due to strong growth across geographies. Growth rates across major geographies were as follows:  Domestic formulations 43% (22% of revenues), Formulations - US & Europe 49% and 33% in dollar terms (48% revenues,) , Japan 2% and 9% in yen terms (11% revenues) , API 10% (10% revenues), Formulations RoW 35% (6% revenues) and S. Africa 29% (4% revenues).
m  Healthy margins: Lupin’s EBIDTA margin improved by 610bps YoY from 19.4% to 25.5% due to overall decline in cost. The company’s material cost declined by 470bps from 39.7% to 35.0% of revenues due to the change in product mix with higher revenues from the regulated markets. Lupin’s personnel cost dropped by 120bps from 14.0% to 12.8%. Other expenses were marginally lower by 10bps from 26.9% to 26.8% of revenues.

m  Strong product pipeline in the US: Lupin has filed 176 ANDAs with US FDA of which 78 have been approved. The company filed 21 ANDAs in FY13 of which 14 were approved. Lupin has filed 138 DMFs with US FDA. The company has plans to file 25 FTFs with US FDA of which 12 are exclusive. It plans to file ~10 oral contraceptive (OC) products with US FDA. We expect this strong pipeline to drive future growth for the company.

m  Market leader in the US:  Lupin is the market leader in 24 products out of 46 products marketed in the US generic market. The company is amongst the top 3 by MS in 37 of these products as per IMS-March’13 data.

m  Valuations: We expect Lupin to benefit from good growth in the domestic and US markets and from the introduction of new products. We have revised our EPS estimates upwards for FY14 and FY15 by 17% and 21% respectively in view of good results.  At the CMP of Rs731 the stock trades at 19.7x FY14E EPS of Rs37.1 and 15.6x FY15E EPS of Rs47.0. We have a Buy rating for the scrip with a revised target price of Rs925 (based on 22x September’14 EPS of Rs42.1) with 26.5% upside from CMP.

Thanks & Regards, 

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