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Research
Lupin - Q4FY12 Result update - Centrum
Posted On : 2012-05-16 11:16:20( TIMEZONE : IST )
Results affected by higher tax
Lupin sales growth for Q4FY12 was better than our expectation but net profit growth was below our expectation due to lower than expected margin and higher tax provision. The company reported sales growth of 25%YoY due to good growth across all geographies. Its EBIDTA margin improved by 10bps YoY from 19.3% to 19.4%. The company's other income dropped by 50%YoY from Rs163mn to Rs82mn. Depreciation was up by 53% YoY from Rs463mn to Rs706mn due to I-rom acquisition in Japan and additional depreciation of the Indore SEZ facility. The tax rate has gone up from 12.0% to 45.5% of PBT due to the expiry of EOU benefits and prepaid tax on goods shipped to its US subsidiary. Lupin's net profit declined by 32%YoY due to lower other income, higher depreciation and higher tax provision. The company is likely to benefit from better utilisation of the Indore SEZ and strong product pipeline in the US. We have retained Buy rating for the scrip with a target price of Rs635 (based on 20x FY14E EPS of Rs31.8).
- Good revenue growth across geographies: During the quarter, Lupin's domestic business (25% revenues) grew by 24%YoY from Rs3.93bn to Rs4.85bn compared to the industry growth of 15%. Its formulation exports to US and EU (48% revenues) grew by 46%YoY from Rs6.23bn to Rs9.12bn. Formulation exports to Japan (14% of revenues) grew by 67%YoY from Rs1.62bn to Rs2.69bn.
- Margin maintained: Lupin reported 10bps YoY improvement in EBIDTA margin from 19.3% to 19.4% due to the decline in other expenses. The company's material cost declined by 20bps from 39.9% to 39.7% due to the change in product mix with higher exports. Personnel expenses went up by 100bps from 13.0% to 14.0% of revenues with the addition of manpower. Other expenses declined by 80bps from 27.7% to 26.9% of sales.
- Higher tax rate: Lupin has provided tax at 45.5% of PBT compared to 12.0% due to the expiry of EOU benefits and prepaid tax of Rs590mn for goods shipped to the US subsidiary. Lupin has transferred the stocks of generic Geodon and Fortamet to its US subsidiary in March'12. The management expects reversal of this tax in future quarters.
- Strong product pipeline: Lupin has launched 45 generic products in the US. Seventeen of its products are ranked No.1 and 36 appear among the top 3 in the US generic market. Lupin has filed 25 ANDAs and 12 DMFs in the US in FY12.
- Attractive valuations, Reiterate Buy: We expect Lupin to benefit from strong growth in US, Japan, Africa and India markets. Lupin's margins are likely to improve with the higher capacity utilization of its Indore SEZ facility. We have revised the EPS estimates downwards by 9% for FY13 and 8% for FY14. At the CMP of Rs515, the stock trades at 20.0x FY13E EPS of Rs25.7 and 16.2x FY14E EPS of Rs31.8. We retain Buy rating for the scrip with a target price of Rs635 (based on 20x FY14 earnings).
