Lupin - Another strong quarter; BUY :: Religare

Visit http://indiaer.blogspot.com/ for complete details �� ��


Lupin Ltd
Another strong quarter; Maintain BUY

Lupin’s (LPC) Q2FY11 results were largely in line with our estimates. The
company clocked a growth of 26%/65%/34% in its topline /EBITDA /adj. PAT
during the quarter, largely driven by robust growth across the American,
European, Japanese and RoW markets. LPC’s domestic formulations business,
however, reported a slightly lower growth of 16% (vis-à-vis 21% last quarter)
due to one-time inventory write-backs. We believe that the company’s
underlying growth trajectory remains strong across most of its key markets,
with incremental product opportunities in the US. We remain positive on LPC
and reiterate a BUY on the stock. Rolling six months forward to Sept ’11, we
have a revised target price of Rs 510 (a 15% upside from current levels).


Sales soar by 26%: LPC reported a 26% increase in its Q2FY11 sales driven by
growth in its US and Indian operations. The company benefited from the
exclusivity of generic Lotrel in the US market. Excluding the impact of one-offs in
the US market, LPC reported a 20% increase in sales. Key revenue drivers for the
quarter were the domestic formulations business (16% growth, 31% of sales) and
the US business (19% growth, 30% of sales). The Japanese market (12% of sales)
also reported a strong 22% growth during the quarter.

Base EBITDA margin expands 120bps: An improved product mix led to a sharp
30% YoY increase in gross profits, translating into a 120bps expansion in the
EBITDA margin for the base business. Adj. PAT for the base business, however,
increased only by 6% YoY as net level performance was impacted by higher
depreciation charges and a lower other income.

Concall highlights: a) US: LPC plans to launch 8-10 non-OC (oral contraceptive)
products over FY12E, primarily plain vanilla launches and semi-exclusive
products. The OC portfolio is on track—LPC plans to hit the market with its first
set of 4-5 products by Q3FY12E. By FY13E-end, the company plans to expand its
portfolio to 12-15 products. b) Product updates: Suprax: Received approval for
chewable tablet form of Suprax—does not face any competition in this form; has
filed for line extension via 505 (b)(2) route. Antara: Prescription growth is picking
up gradually on the back of increasing market reach led by a stronger sales force.
AllerNaze: Manufacturing problems not yet overcome—near-term launch
unlikely. c) Japan: Four new product launches planned in Nov ’10; government
support to retail pharmacies is boosting growth in the generics space.

Maintain Buy: The stock is currently trading at a PER of 22.7x/19.3x FY11E/12E
earnings. We roll forward our target price from Mar ’11 to Sept ’11 (Rs 460 to
Rs 510) based on 19x Sep ’12E earnings. Maintain BUY.