Buy Lupin Labs - Motilal Oswal

Lupin Labs (LPC IN, Mkt Cap US$4.3b, CMP Rs443, Buy)

3QFY11 net sales grew 17% YoY to Rs14.7b , EBITDA grew 10% YoY to Rs2.7b ,while PAT grew 39.5% YoY to Rs2.24b Reported PAT was slightly higher than estimates due to lower taxes.

Topline growth was led by 24% growth in formulations revenues in emerging markets (India up 16% and emerging markets up 58%) and 16% growth in the Japanese operations.

R&D expenses for the quarter were up 26% at Rs1.17b (8% of net sales). The company filed 5 ANDAs for the quarter and has 90 ANDAs pending approval.

Lupin is likely to witness a gradual improvement in underlying fundamentals led by an expanding US generics pipeline, niche/ Para-IV opportunities in the US, strong performance from Suprax, ramp-up in Antara revenues (branded products in US), and traction in formulation revenues from its European initiative.

We expect EPS at Rs19.5 for FY11 (up 27%), Rs23.6 for FY12 (up 21%) and Rs24 for FY13 (up 1%). While our estimates factor in generic competition for Suprax from 2HFY12 onwards (thus impacting FY13 EPS), any out-of-court settlement for Suprax patent litigation is likely to raise our earnings for FY12/13.

The stock trades at 22.7x FY11E, 18.7x FY12E and 18.5x FY13E EPS with a sustained 25-30% RoE. Our estimates do not include one-time upsides for the company’s FTF pipeline in the US.

Source : Equity Bulls

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