Lupin Ltd. share price target

Outlook & Valuation: We downgrade our revenue estimates by 7.5% for FY21E to Rs 169.6 bn on account of downgrade across regions while we introduce FY22E revenue estimates at Rs 186 bn.

Q4FY20 revenues declined 12.7% YoY to | 3845.7 crore (I-direct estimate: | 3715 crore) mainly due to Kyowa divestment and due to 9.3% YoY decline in US revenues to | 1579.1 crore (I-direct estimate: | 1483 crore). Domestic formulations grew 13.3% YoY to | 1192.1 crore (I-direct estimate: | 1137 crore). EBITDA margins contracted 614 bps YoY to 13.7% (I-direct estimate: 13.2%) due to lower gross margins and higher employee cost. EBITDA de-grew 39.8% YoY to | 526.3 crore (I-direct estimate: | 489 crore). Exceptional items include profit on Kyowa Pharma divestment of |...

30 May 2020 Revenues in 4QFY20 were down 1.1% YoY to INR38.5b (v/s est. INR41.4b), due to decline in US sales, partially offset by growth in the DF business. US sales were down 13.5% YoY to USD212m (42% of sales). APAC sales were down 16% YoY to INR1.4b (4% of sales). On the other hand, DF sales (31% of sales) were up 13.3% YoY to INR11.9b. Also, EMEA (Europe, Middle East and Africa) sales were up 7.4% YoY to INR3.5b (9% of sales).

Metformin recall to be limited in few batches only We expect US business to get back on track and lead the growth for LPC over FY20-22E due to 1) resolution of Somerset, Goa and Pithampur (Unit-2) in FY21E 2) early launch of Albuterol 3) ramp up of Levothyroxyn 4) launch of complex injectables, Biosimilar and Spiriva in FY22E. LPC guided for EBITDA...

Resolution of Goa and Pithampur (Unit-2) holds the key. We upgrade LPC to Buy' (earlier Reduce) with TP of Rs978 (earlier Rs685). We assigned 24x PE (earlier 22x) on FY22E due to better earnings visibility from the US market led by easing of regulatory issues. We increase our EE by 31% for FY21E-22E led by US revenue growth of 10-15% constant currency (earlier 5-7%) and EBITDA margin expansion of 200bps due to savings from...

On the business front, despite the nationwide lockdown, domestic growth is expected to remain more or less stable. Exports growth, barring for one or two months due to congestion in all major ports globally, is also expected to remain strong due to 1) currency benefit, 2) slowdown in competition due to delay in new approvals that will be beneficial for existing players and 3) expected demand continuum across the world despite Covid-19. Some windfall is also expected in some critical productsa case in point is Hydroxychloroquine, a malaria drug that is likely to be repurposed as a prophylaxis for Covid-19 treatment in some cases....

Lupin Limited is a multinational pharmaceutical company based in Mumbai. The company specializes in branded and generic formulations, API's and advanced drug delivery systems in the area of biotechnology. The company...

Q3 revenues declined 16% YoY to | 3769.3 crore due to divestment of Japanese business. Excluding Japan, YoY growth was mere 2.7%. Strong growth in domestic braded formulations was largely offset by decline in US generic business. Domestic formulations grew 9% YoY to | 1296.9 crore (Idirect estimate: | 1344.9 crore). US revenues grew 3.9% YoY to | 1376.6 crore (I-direct estimate: | 1412.8 crore). EBITDA margins contracted 532 bps YoY to 11.4% mainly due to higher sales promotional expenses, remedial cost and R&D; spend. EBITDA de-grew 37% YoY to | 430 crore. Exceptional items include impairment of | 1579.8 crore related to certain acquired IPs...

Lupin's Q3 EBIDTA margin came below expectations at 11.4% (down 588bps YoY, down 190bps QoQ) led by higher other exp (remediation cost, higher promotional spend) and R&D cost. Large one offs related to Gavis impairment, Japan divestiture led to reported loss of Rs83.5bn. We resume coverage with a Neutral rating and TP of Rs705/sh based on 20x FY22 EPS. Lupin has an excellent India franchise (35% of revenues, grew at 13% CAGR over last 5 years), however, with 40% of revenues from US, a lot hinges on pipeline execution, outlook for which is contingent on: a) execution of three key assets Levothyroxine (market share ramp up), Solosec (branded product) and approval for gProAir; b) resolution of compliance issues at its US FDA facilities (5 with OAI status including 2 WL). While we factor increased traction in the US and also build margin expansion on back of cost control efforts & operating leverage, valuations at 21x FY22 EPS appear full.

Lupin (LPC) reported a 40% miss on Q3 EBITDA while one-offs dented PAT (incl. US$ 222mn Gavis impairment).