Rating: Buy; Target Price: Rs1,230; CMP: Rs942; Upside: 30.6%
Strong sustainable growth
We maintain Buy rating for Lupin with a target price of Rs1,230
(earlier 1,200) due to expectation of good growth in the US and
domestic businesses. Strong growth in key geographies of US, Europe
and RoW along with API business is expected to drive future growth. A
large number of new offerings in the US generic market are likely to
maintain growth momentum in the US. Lupin's domestic business is
getting back on track after trade related issues, which will help in
strong domestic growth. With limited competition products in the US
and recent acquisition of Nanomi, Netherlands we expect strong and
sustainable growth for Lupin in the US market. Key risks to our
assumptions are stiff competition from other global players and
regulatory risks for its various manufacturing facilities. Lupin
remains one of our top picks in the pharma sector.
$ US business to drive growth: Lupin derives 48% of its revenues from
its US & European formulation business. This business grew by 30% in
Q3FY14. The company has a strong pipeline of 186 ANDAs filed with US
FDA of which 96 have been approved. Lupin has launched 62 products in
the US generic market of which 26 are market leaders and 44 among top
three. The company launched five new products in Q3FY14, which
performed well and generated revenues of ~$40mn (Rs2.5bn). Notable
among these was generic Cymbalta, an antidepressant drug patented by
Eli Lilly. We expect US business to drive future growth of the
company.
$ Plans to launch generic Nexium: Lupin has plans to launch generic
Nexium or esomeprazole used in the treatment of heartburn in the US
market. Nexium patented by Astra Zeneca has US sales of ~$2.0bn
(Rs124.0bn) and its patent is expiring in May'14. The export ban to US
on generic products of other Indian companies including Ranbaxy Labs
(RLL), Wockhardt and Strides Arcolab is likely to benefit other
generic players. Lupin has gained market share in the area of
cephalosporins in the US as a result of the ban. The recently launched
generic Trizivir and Trilipix are likely to remain limited competition
products in the US. The company has plans to triple its product
portfolio in the US over next few years.
$ Enters into complex injectable business: Lupin has acquired Nanomi
BV, Netherlands for an undisclosed sum. Nanomi has a patented
technology platform in niche complex injectables based on
nanoparticles and microseive emulsion technology. With this
acquisition, Lupin has entered into niche complex injectables where
the competition is minimal. The management expects ANDA filing based
on these technologies after 3 years based on the differentiated
products. Nanomi has a a rich talent pool of scientists who will be
backed by Lupin's global R & D and manufacturing teams.
$ Recommendation and key risks: We maintain Buy rating on the scrip
with a revised target price of Rs1,230 based on 22x Dec'15 EPS of
Rs56.1 with an upside of 30.6% from CMP. We expect Lupin to perform
well in future due to good growth in the US & EU, RoW markets and in
API business. Moreover, the company has resolved trade related issues
and is back on track in the domestic market. We have revised our EPS
estimates upwards for FY14 and FY15 by 3% and 4% respectively. Key
risks to our assumptions are stiff competition from other global
players and regulatory risks for its various manufacturing facilities.
Lupin remains one of our top picks in the pharma sector.
Thanks & Regards
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Strong sustainable growth
We maintain Buy rating for Lupin with a target price of Rs1,230
(earlier 1,200) due to expectation of good growth in the US and
domestic businesses. Strong growth in key geographies of US, Europe
and RoW along with API business is expected to drive future growth. A
large number of new offerings in the US generic market are likely to
maintain growth momentum in the US. Lupin's domestic business is
getting back on track after trade related issues, which will help in
strong domestic growth. With limited competition products in the US
and recent acquisition of Nanomi, Netherlands we expect strong and
sustainable growth for Lupin in the US market. Key risks to our
assumptions are stiff competition from other global players and
regulatory risks for its various manufacturing facilities. Lupin
remains one of our top picks in the pharma sector.
$ US business to drive growth: Lupin derives 48% of its revenues from
its US & European formulation business. This business grew by 30% in
Q3FY14. The company has a strong pipeline of 186 ANDAs filed with US
FDA of which 96 have been approved. Lupin has launched 62 products in
the US generic market of which 26 are market leaders and 44 among top
three. The company launched five new products in Q3FY14, which
performed well and generated revenues of ~$40mn (Rs2.5bn). Notable
among these was generic Cymbalta, an antidepressant drug patented by
Eli Lilly. We expect US business to drive future growth of the
company.
$ Plans to launch generic Nexium: Lupin has plans to launch generic
Nexium or esomeprazole used in the treatment of heartburn in the US
market. Nexium patented by Astra Zeneca has US sales of ~$2.0bn
(Rs124.0bn) and its patent is expiring in May'14. The export ban to US
on generic products of other Indian companies including Ranbaxy Labs
(RLL), Wockhardt and Strides Arcolab is likely to benefit other
generic players. Lupin has gained market share in the area of
cephalosporins in the US as a result of the ban. The recently launched
generic Trizivir and Trilipix are likely to remain limited competition
products in the US. The company has plans to triple its product
portfolio in the US over next few years.
$ Enters into complex injectable business: Lupin has acquired Nanomi
BV, Netherlands for an undisclosed sum. Nanomi has a patented
technology platform in niche complex injectables based on
nanoparticles and microseive emulsion technology. With this
acquisition, Lupin has entered into niche complex injectables where
the competition is minimal. The management expects ANDA filing based
on these technologies after 3 years based on the differentiated
products. Nanomi has a a rich talent pool of scientists who will be
backed by Lupin's global R & D and manufacturing teams.
$ Recommendation and key risks: We maintain Buy rating on the scrip
with a revised target price of Rs1,230 based on 22x Dec'15 EPS of
Rs56.1 with an upside of 30.6% from CMP. We expect Lupin to perform
well in future due to good growth in the US & EU, RoW markets and in
API business. Moreover, the company has resolved trade related issues
and is back on track in the domestic market. We have revised our EPS
estimates upwards for FY14 and FY15 by 3% and 4% respectively. Key
risks to our assumptions are stiff competition from other global
players and regulatory risks for its various manufacturing facilities.
Lupin remains one of our top picks in the pharma sector.
Thanks & Regards
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