Lupin - Results In-line - Long-term Outlook Remains Intact - Karvy

Lupin's revenues grew 43.8% YoY to Rs. 22,537 mn in Q1FY13, in-line with our estimates of Rs. 22,487 mn. The company is confident of launching 120 products in US over next 3-4 years. Launch of additional products in Japan and back-ending of key products inspires confidence about the company's focus in its key markets. We upgrade our EPS but reiterate our HOLD rating on the stock.

- Quarter Details: The Company's Domestic Formulations (DF) business grew 25.0% YoY to Rs. 6,212 mn primarily due to inclusion of Eli Lilly insulin revenues. Lupin's US revenues rose 62.7% YoY to Rs. 8,024 mn. Its EBITDA was reported at 20.3% in Q1FY13, broadly in-line with our estimate of 20.6%. Other income was aided by translation gain to the tune of Rs.210 mn. Lupin's net profit stood at Rs. 2,804 mn in Q1FY13 - marginally higher than our estimates of Rs. 2,762 mn.

- Positive Outlook: Lupin has guided for 20-25% y-o-y improvement in the Japanese business (excl- Irom). The domestic business is expected to witness a 20% y-o-y improvement going ahead. The company is looking forward to the launch of Suprax drops by end FY13 and launch of Yazmin and Tricor during FY13.

- Outlook & Valuation: We upgrade our revenue estimate by 3.4% to Rs.93.2 bn for FY13E and upgrade by 4.0% to Rs. 102.5 bn for FY14E, mainly on higher realization in lieu of forex, upgrade in US, Japan and ROW. We upgrade our EBDITAM from 18.8% to 21.3% for FY13E and from 19.2% to 21.4% for FY14E due to lower other expenses and better gross margins. We upgrade our EPS estimate by 20% in FY13E to Rs. 26.7 and by 17.8% to Rs. 29.8 for FY14E. We value Lupin's core business at 21xFY13E (20% price upgrade) at a price of Rs. 625 and maintain our "HOLD" recommendation on the stock.

- Risks: Decline in growth estimates in domestic business and delay in OC launches due to regulatory reasons will have negative impact on the Company's profitability.

Source : Equity Bulls

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