Lupin: Low on revenues, high on margins ::Kotak Sec, report

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Low on revenues, high on margins. Lupin’s 3QFY15 results were mixed as revenues missed estimates on the back of a second straight miss for US generics division as Cymbalta and Niaspan price erosion impacted base comparison and offset Celebrex launch. Despite the decline in these high-margin opportunities, gross and EBITDA margins surprised positively with +150 bps qoq swing. We see the decline in US sales as a temporary blip and expect continued momentum on the back of US launches over FY2016/17E. Reiterate BUY rating with revised TP of `1,700 (`1,600 earlier).

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Lupin - Higher margin outstrips subdued sales growth :ICICI Securities, report

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Lupin - Good Quarter; Prepping for Inorganic Forays; Result Update Q3FY15 :: Edelweiss

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Lupin receives FDA approval for Generic Epivir; Maintain BUY rating with PT of Rs1,710 :: IndiaNivesh

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Biocon, Lupin, Prism Cement & KPR Mills reports: Indianivesh

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NiveshMonthly December 2014 : Buy Prism Cement , Lupin

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Lupin -Robust US franchise, strong margins here to stay; upgrade to BUY :: ICICI Securities,

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Lupin - Decent Quarter, Outlook Bullish; Result Update Q2FY15 :: Edelweiss PDF link

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

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Lupin -- Buy; Target Price: Rs1,680; Microsec

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Annual Report Analysis - Lupin: Edelweiss PDF link

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Lupin’s FY14 annual report analysis highlights robust operating performance with revenues clocking 17.1% YoY growth, PBT rising 47.1% to INR28.3bn and RoCE surging to 41.0% (FY13: 32.7%). The growth and margin improvement was mainly  supported by better product mix and exchange rate depreciation. Our calculation suggest constant currency EBITDA growth of 15.2% vis-à-vis reported of 32.3%.  Subsidiaries’ performance improved with combined PAT moving up to INR2.8bn in FY14 from INR1.2bn in FY13. However, Lupin invested INR3.0bn in the loss-making entity, Lupin Atlantis Holdings SA (LAHSA) that posted loss of INR1.3bn in FY14.  Net unhedged receivables were at INR6.3bn, at 9.0% of net worth in FY14 as opposed to a payable position of INR4.6bn, at 8.9% mainly due to repayment of foreign currency borrowings. Loans outstanding fell to INR6.5bn with D/E ratio at 0.1x in FY14 (FY13: INR11.6bn, D/E ratio 0.2x).

What’s on track?

Lupin reported stellar operating performance , mainly aided by better product mix and exchange rate depreciation. EBITDA margin and RoCE stood at 26.6% and 41.0% (FY13: 23.5% and 32.7%), respectively.

Subsidiary Lupin Pharmaceuticals Inc., (LPI) paid INR3.0bn dividend to Lupin in FY14 (FY13: INR0.0)

Operating cash flow post interest and adjusted for acceptances recorded robust 65.9% YoY growth to INR20.0bn in FY14, owing to strong profitability and marginal fall in working capital requirement.

Ratio of capitalised R&D to total R&D expenditure has been on a declining trend — from 16.5% in FY10 to 6.6% in FY14. R&D expense stood at INR9.6bn in FY14, @ 8.5% of revenues (FY13: INR7.7bn, 8.1% of revenues).

Loans outstanding fell to INR6.5bn with D/E ratio at 0.1x in FY14 (FY13: INR11.6bn, D/E ratio at 0.2x).

What needs tracking?

EBITDA growth in constant currency stood at 15.2% vis-à-vis reported 32.3%.

Lupin invested INR3.0bn in LAHSA in FY14, which posted loss of INR1.3bn in FY14 (FY13: loss of INR1.2bn).

Through LAHSA and LHBV, Lupin acquired four more subsidiaries that posted combined loss after tax of INR342.0mn.

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Lupin: Buy :Business Line

Lupin, TP: INR851 Buy ::Motilal Oswal

4QFY13 performance was above estimates. Key highlights:
 Lupin's revenue grew 35% YoY to INR25.37b. Ex one-offs, core revenue grew
38% to INR23.57b (est of INR22.73b). Core EBITDA was up more than 2x to
INR5.1b (est of INR4.43b) on a low base of 4QFY12. Ex one-offs, adj PAT was
at INR3.36b (est of INR2.6b). PAT growth is higher than EBITDA growth due to
lower tax rate of 20.7% v/s estimate of 33% and 45% in 4QFY12.
 Reported EBITDA grew by 83% to INR6.1b (v/s est of INR5.42b) and reported
EBITDA margin expanded by 6.4% YoY to 24% on a low base. Margin expansion
was mainly on account of (1) contribution from one-off sales, (2) better
product mix in the US and (3) lower other expenses and employee costs
(operating leverage benefit). Notably, PAT growth, aided by strong
operational performance, has been achieved despite higher depreciation
costs, which include product write-off for carrying the value of Antara brand.
 Key takeaways from analyst meet: LPC aspires to touch USD5b (FY13 -
USD1.8b) in sales over the next five years to be achieved through (1) entering
niche segments of derma, controlled substances, inhalation; (2) biosimilars
opportunity and (3) inorganic opportunities in LatAm, Japan or RoW markets.
Lupin has a pipeline of 116 products (market size of USD54b) to support US
growth, while India formulations will continue to outperform the industry.
Maintained target of 75-100bp YoY improvement in EBITDA margin.
Valuation and view: Key growth drivers in FY14E/15E will be: (1) increased traction
in India formulations and emerging markets, (2) strong launch pipeline for the
US and (3) contribution from oral contraceptives in the US. Post 4QFY13 results,
we raise FY14E/15E estimates by 13%/14%, primarily to reflect the strong
operational performance in core business. We expect EPS of INR34.8 for FY14E
(up 38.8%), INR42.5 for FY15E (up 22%) - 30% EPS CAGR for FY13-15E. The stock
trades at 20.8x FY14E and 17x FY15E EPS. Buy with a TP of INR851 (20x FY15E EPS).

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, 

-- 

Strong operating performance - Lupin :: Centrum

Strong operating performance
Lupin’s results for Q3FY13 were better than our expectations. The company
reported 37%YoY growth in revenues, 360bps improvement in EBIDTA
margin and 43%YoY growth in net profit. The sales growth was across all
major geographies. Notably among them were, 68%YoY growth in the US
market and 48%YoY in Japanese market. The higher growth in US was due to
the launch of generic Tricor. The company’s 22 of the 43 generic products are
market leaders in the US. Lupin has entered the US generic market in the oral
contraceptive (OC) segment with a basket of eight products. We have a Buy
rating for the scrip with a target price of Rs699 (based on 22x FY14E EPS).
Excellent sales growth: Lupin reported 37%YoY growth in revenues from
Rs18.20bn to Rs25.01bn due to excellent growth in major markets. The sales
growth in various geographies is as follows: US formulations 68%YoY, Japan
48% (due to the acquisition of I’rom), S. Africa 43%, India formulations 14% and
RoW 8%. However, revenues from Europe declined by 7%YoY.
Higher tax rate: Lupin’s tax rate has gone up from 22.6% to 38.1% due to the
expiry of EOU benefits and unrealised profit on inventory lying with the
subsidiary. The management has guided a tax rate of 34-35% for FY13 and
FY14.

LUPIN PHARMACEUTICALS Back to back OC approvals :: Edelweiss

Lupin has received two approvals of Oral contraceptives (OCs) during the
week (Lutera and Plan B) and with this the company has a basket of 8
approved products in the OC portfolio. These molecules have limited
competition and offer strong incremental revenue upside and margins to
US generics over medium term.
Lupin has received an approval from USFDA for an oral contraceptive (OC) generic ‘Plan
B’. The total market size of there drug in USD 81mn and Watson and Perrigo are two
the players in the market. It also received approval for Lutera which has potential
market size of USD104 with only one competitor in the market. Management expects
meaningful contribution from these opportunities to its US generics franchise.
Financial impact
We estimate USD8‐10mn sales per annum from Plan‐B assuming 20% price erosion and
10% market share for Lupin. We also highlight that Lutera offers sizeable opportunity
for Lupin with sales contribution of USD15‐20mn per annum as the product has only
one other generic player (Watson).
Outlook and Valuations
Moreover, the products introduced over past six months offer strong scale‐up potential
and would incrementally contribute to growth of US generics base business over FY14‐
15E. We estimate sales growth of 27% CAGR in US (ex‐Para IV) over FY13‐15E. Maintain
‘BUY/Sector Outperformer’ rating at TP INR642.

Lupin (Buying Range: |590-|565) •Muhurat Picks - 2012 :: ICICI Direct

Lupin (Buying Range: |590-|565)
• Lupin is well poised to register strong growth in the US generic
space as the gap of filing and launches (176 approvals and just 42
launches cumulatively) assures sales traction for a sizable future,
add to this, the potential upsides from FTFs and limited
competition products (at least 10). The branded space is expected
to get a boost from the launch of Suprax drops and chewable
version.
• Things are also improving in Japan where we expect
improvement in gross margins once product supplies from Goa
facility kick in. The India business is also slated to grow above
industry average with chronic focus and new launches
• The management has guided for ~100 bps improvement in
EBITDA margins every year on the back of continuous
improvement in product mix and cost rationalisation. We expect
sales, EBITDA and PAT to grow at a CAGR of 24%, 27% and 29%,
respectively, in FY12-14E. The stock is currently quoting at 18x
FY14E EPS of | 32.5.

Lupin: Buy :: Business Line

With the recent gains, market attention has been shifting away from defensive stocks into out-of-favour cyclicals. But Lupin remains a good buy for investors with a two-three year perspective, given its sound fundamentals and high visibility on profit growth.

At the current market price of Rs 583, the stock trades 18.1 times its estimated FY14 earnings. Though stiff valuations may limit the upside potential in the near term, the stock is poised to deliver 15-17 per cent returns over a one-two year time-frame.

Lupin’s surprising rise in Quetiapine:: Elara

We notice Lupin’s surprising rise in prescription (Rx) share in August
2012 in Quetiapine (Seroquel) after staying moderate at 8-10% market
share. The drug went off-patent in March 2012 and Lupin received
approval on day-one of generic competition along with other para-IV
challengers. We believe that Lupin’s growth to 35,208 Rx in August
2012 from average 8,063 Rx in April-July 2012 need an insight in the
cause, while other competitors remains at similar number of Rx in
August 2012. Though management explains the rise is normal
business progression, we believe the reason could be aggressive price
cut/special incentive to attract distributors’ in Seroquel. The growth
could also be a result of falling supply in market from leading
competitors. At innovator price, the Alzheimer drug’s market value
was USD4.5bn in US before being generic.

Annual Report Analysis - Lupin: EDEL

Lupin FY12 BS highlights robust disclosures and stable operating performance, however higher w/cap requirement has affected operating cash flows. PAT was lower due to significant jump in tax rate. In our view tax adjustment on unsold inventory should not be considered as one off in the financial models.