Lupin -Quarterly adjusted PAT surpasses its previous all-time high :: IndiaNivesh

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Higher other income and lower tax led to better-than-expected
earnings for the quarter
Lupin (LPC IN) underperformed in terms of sales, while outperformed in terms of
earnings with respect to our estimation for the quarter. Revenue was lower than
our estimates primarily due to lower than expected US sale. Despite this, PAT was
higher than our estimates mainly due to higher other income and lower tax for
the quarter. We maintain our earnings estimate for FY15/FY16 and price target
of Rs1,545 (based on 24x FY16E earnings). We strongly believe that growth drivers
for LPC are intact and hence maintain our BUY rating on the stock.

Quarterly adjusted PAT surpasses its previous all-time high: Adjusted PAT grew by
55% y-y to Rs6.3bn, led by strong growth in domestic formulation, decent growth
in US generics and improved operating leverage. Other income rose sharply by 36%
y-y to Rs1.1bn, partly due to forex gain of Rs847mn for the quarter (The net forex
gain for the quarter was Rs170mn). The other operating income also increased by
55% y-y to Rs566mn. The tax outgo decreased by 25% y-y to Rs1.9bn. The higher
other income and lower tax led to PAT grow much faster than sales. Though the tax
rate was lower at 23% for the quarter, management has guided for 32% for FY15.
R&D for the quarter at Rs2.8bn formed 9.1% of net sales. Management has
maintained R&D spent guidance of 9-10% of net sales for FY15. Though the capex
spent at Rs2bn was higher for the quarter, LPC has maintained its capex guidance
of Rs5.5bn for FY15.
EBITDA margin up 121bps y-y, while down 732bps q-q: EBITDA margin came in at
24.9% for the quarter. There has been adverse impact on EBITDA margin sequentially,
mainly due to increased contribution of high margin products like g-Cymbalta,
g-Niaspan in Q1FY15. However, there has been price erosion in these products due
to higher competition, which led to fall in EBITDA margin for the quarter.
Management has guided for improvement in EBITDA margin in coming quarter on
the back of new product launches. Management has guided for 28-30% EBITDA
margin for FY15.
US generics and domestic formulation remains key drivers for sales growth in 2Q
FY15: Sales grew by 18.4% y-y, led by 23% y-y and 20.4% y-y growth in sales of US
generic and domestic formulation segment respectively. Domestic formulation
growth was largely driven by volume growth. Though US generic has contributed
considerably for y-y growth of overall sales, the y-y growth of US has been muted
compared to y-y growth of previous quarters. The price erosion in key products like
g-Cymbalta and g-Niaspan and adverse seasonal impact on cephalosporin sales led
to such muted growth in US generics. Japan sales grew by 22% in JPY terms led by
better sales growth of Kyowa.
LPC guided for 20-25% y-y growth (in $ terms) in US generics for FY15: US generics
sales came in at US$202mn against US$167mn y-y and US$260mn q-q. During the
quarter, LPC did not file any ANDA and hence cumulative ANDA filing remained at
200. LPC received two approvals during the quarter, taking the cumulative approval
to 105. The ANDAs pending for approval stand at 95 at the end of Q2FY15. LPC
launched three products during the quarter, taking the total launches in H1FY15 to
seven. LPC has guided for ten product launches in Q3 and Q4, which would enable
LPC to have 20-25% y-y growth in US generics for FY15.

LINK
http://www.indianivesh.in/Admin/Upload/635501736888367500_Lupin_Q2FY15%20Result%20Update.pdf