Lupin - Still some steam left: UBS

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UBS Investment Research
Lupin Limited
Still some steam left
􀂄 Reiterate Buy rating, strong guidance
We reiterate our Buy on Lupin, as it continues execute successfully in all its
markets—India, Japan and the US. Management expects margins to improve and
revenue to grow 25-30% YoY for the next couple of years. Lupin continues to look
for potential M&A candidates in emerging markets, and for brands and technology.


􀂄 US generic business momentum remains strong
Geodon exclusivity contributes Rs20 to our FY13 EPS estimate. Lupin has filed
132 products with the US FDA and plans to file around 35-40 ANDAs in FY11,
with a focus on niche and attractive areas such as oral contraceptives, and modified
release and ophthalmic products. It is also looking at dermatology as an area for
future filings. We believe the large number of filed Para IVs will add visibility to
earnings over the medium term, driven by settlements or litigation outcomes.

􀂄 Delay in AllerNaze launch a concern, Suprax line extension positive
In its Q2 FY11 conference call, management stated there are manufacturing issues
that have delayed the H2 FY11 AllerNaze launch. While timelines have not been
disclosed, we believe a significant delay in the AllerNaze launch will result in
lower EPS in FY12. Lupin recently received approval for Suprax chewable tablets.
Approval of line extensions continues to reduce the risk of Suprax becoming a
generic product.

􀂄 Valuation: price target of Rs540.00
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
11%.