Lupin - Performance pre-requisite for premium valuations - Karvy

Lupin is very positive on the US business particularly the Oral Contraceptive (OC) business. It remains cautious on the new pricing policy. The key for sustaining premium valuations would be ramp up in US (especially OC), sustenance of Suprax. We revise our earnings downwards and Maintain our HOLD rating on the stock.

Oral Contraceptive Market

The company has launched 3 products and is hoping to launch another 10 in the Q3 and Q4 of the current year. Lupin is confident of launching another 10 products in FY14. The entire basket of 28 products would be launched by CY14.

Suprax and Antara

The company is confident of the Suprax brand remaining intact for the next two years. The Fenofibrate market is not growing while the Antara market is growing at 6-7 %. The company does not fear that Antara will face a major problem when Tricor is fully genericised in December 2012 due to product superiority and better efficacy.

Pricing Policy

The company currently has 18 % of domestic formulations under price control which will increase to 30 % under the new NLEM. The impact on cost based pricing could be as high as 4.5-5 % on the earnings.

View and Valuation

We revise our revenue estimates downwards on FY13E and FY14E mainly on account of slower ramp up in the US business mainly on account of lower approvals, lowering Tricor revenues in FY13E and removal of Allernaze revenues for FY14E. We downgrade our EPS estimates for FY13E by 3 % to Rs 25.7 and for FY14E by 1.7 % to Rs 29.3. We downgrade our price target by 1.6 % to Rs 615 based on 21x FY2014E. We maintain our HOLD rating on the stock.

Source : Equity Bulls

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