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Lupin Limited
2Q earnings beat; Raise PO
Strong qtr, momentum to sustain
Q2 profit at Rs2.15bn (34% yoy) was 8% ahead of estimates due to lower taxes,
while EBITDA at Rs 2.7bn was in line. Sales grew 26% yoy at Rs14bn (4% ahead
of est), led by stronger US generics (up 55% yoy) and Japan (up 22%), although
domestic formulation (up 16%) lagged industry. Retain estimates for FY11E, but
raise forecasts by 2%/7% over FY12-13E. PO revised 19% to Rs 501.
Sales outlook appears brighter
We moderate branded US sales by 3%/9% over FY11-13E (slower ramp up of
Antara, delay in Allernaze), but still raise forecasts on (1) strong pipeline (87
ANDAs, 54 Para IVs, inc 15 FTFs) leading to increased US generic launches at
16/20 over FY12/13E compared to 12 earlier, and (2) better volumes in Japan (4
launches in H2). Retain domestic formulations growth at 17% CAGR on recent
field force addition and new divisions i.e. female health, ophthalmology, oncology.
Margin assumptions largely retained
We lower FY11E EBITDA margins by 20bps at 19.8%, but retain assumptions of
140bps increase over FY12-13E due to increased sales forecasts, mainly niche
generic launches in US (oral contraceptives, Para IVs).
Stock deserves to sustain higher multiples
Revised PO is based on 20x FY12E earnings (earlier 17x) in line with large cap
peer average, given superior track record of execution and future visibility of 28%
earnings CAGR (industry 25% CAGR). FTF opportunities like Fortamed (Jun-11)
& Geodon (Mar-12) has not been included in our estimates.
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