Maintain 'hold' on Lupin - Geojit BNP Paribas Financial Services

- Company's 1QFY13 performance is a mixed bag. US generic business declined 9% qoq despite a flat contribution from generic Geodon and 1Q seeing benefits from limited competition launches like generic Combivir and Fortamet.

- It seems that decline in the US business could be due to lower Simvastatin sales (one of Lupin's top five products) as prescriptions move to Atorvastatin.

- India sales grew 25% yoy and it was higher than market expectations.

- Despite this strong performance, the company's EBITDA margin failed to beat market estimates.

- It seems that the margin pressures is due to flat growth in US generic business and lower US generic sales.

- Reported PAT at Rs.280 crore is in line with market estimates.

- EPS estimates for FY13/FY14 have been increased by 12% and 7% respectively on stronger USD versus Indian rupee and change in key geography assumptions.

- It seems that Lupin faces multiple challenges to maintain the current growth rate of its India business with the current therapy mix and some inorganic push may be needed to maintain the current growth momentum.

- Positive surprises may come from the US generic business if potential litigation goes in favor of Lupin.

Source : Equity Bulls

Keywords