2026-03-19 03:09:41
Latest Post
HDFC Bank Chairman Atanu Chakraborty Resigns, Keki Mistry Named Interim Part-time Chairman
CWD Ltd receives order worth Rs. 45.24 crores
Belrise Industries announces strategic acquisition of Chester Hall Precision Engineering, United Kingdom
Mobavenue AI Tech Limited Announces Board Approval for Stock Split of Equity Shares
HCLTech named as one of the World's Most Ethical Companies® by Ethisphere for third consecutive year
Research
Lupin - Strong margin improvement - Centrum
Posted On : 2013-08-19 21:35:54( TIMEZONE : IST )
Though Lupin's results for Q1FY14 were below our expectations, we expect the company to post improved performance in H2FY14. The company reported a growth of 10%YoY in revenues, 350bps in EBIDTA margin and 43%YoY in net profit. It is likely to benefit from the strong growth in the US market from existing products, Suprax and OC products. We have lowered our EPS estimates by 3% each for FY14 and FY15 and maintain Buy rating with a revised target price to Rs1,003 based on 22x FY15E EPS of Rs45.6, an upside of 22.3% over the CMP.
Moderate revenue growth: Lupin reported 10%YoY growth in revenues to Rs24.76bn from Rs22.54bn due to good growth in US, EU and S. Africa. US business (45% of revenues) grew by 29% and S. African business (3% of revenues) by 13%YoY. We expect the US business to grow rapidly due to the introduction of oral contraceptives (OC) and Suprax drops in the US market. Domestic revenues declined by 5%YoY due to NPPP effect.
Good margin improvement: Lupin's margin for Q1FY14 grew by 350bps to 23.8% from 20.3% due to overall decline in costs. Its material cost declined by 100bps to 35.3% from 36.3% due to the profitable product mix. Personnel cost declined by 10bps to 13.3% from 13.4%. Other expenses declined by 240bps to 27.6% from 30.0%. Higher other income was due to Rs960mn in forex gains.
Strong product pipeline for US market: Lupin has filed 177 ANDAs with US FDA of which 86 are approved. The company has a strong brand Suprax in the US market, which grew by 37% in the quarter. Lupin is the market leader in 25 products out of 52 sold in the US generic market. It recently entered into an agreement with Romark Labs, US to market its Alinia suspension in the US. We expect the company to report higher growth in the US due to good growth of its existing products and new product introductions.
Major risks & valuations: Lupin faces major risks from regulatory agencies on non-compliance of its manufacturing facilities. It also faces risks from uncertainties over NPPP in the domestic market. As the company has global exposure it faces risks due to unfavourable currency movements. Lupin faces stiff competition from generic manufacturers in the global markets. At the CMP of Rs820, the stock trades at 22.8x FY14E EPS of Rs35.9 and 18.0x FY15E EPS of Rs45.6. We maintain Buy rating with a revised target price to Rs1,003 based on 22x FY15E EPS of Rs45.6, an upside of 22.3% over CMP.
