Lupin Ltd. share price target

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

Lupin reported revenue growth of 11% YoY to `44,906mn in Q1FY20. Growth was across most of our geographies, led by the U.S. and India.US showed 30% YoY growth while India delivered strong growth at 12% YoY. EBITDA grew by 31% YoY, due to higher gross profit...

Despite delivering strong performance in the US, we were unimpressed by the continued execution issues in getting complex product approvals - bEnbrel in EU and gProAir in US have been elusive so far. At a time when four formulation plants are under OAI or WL, these big-size product approvals have become crucial. Moreover, Solosec ramp up has been slower than expected, keeping margins in check as marketing spend continues to weigh in. Our FY21E numbers do include a ramp up in gLevothyroxine sales and the launch of gProAir and bEnbrel, keeping Rs 34.3 EPS at risk (in case of further delays). However, the branded domestic franchise (valued at ~Rs 650/sh) continues to support the downside. We downgrade LPC to NEUTRAL owing to visible execution woes in the form of (1) slow scale up in Solosec & gLevothyroxine in US, and (2) postponement of bEnbrel approval in EU. 1QFY20s performance beat our estimates led by higher gRanexa contribution. Our revised TP is Rs 760 (22x FY21E EPS) following a 17% cut to our FY21E EPS

Lupin's revenues increased by 15% YoY to Rs 44.2 bn in Q1FY20 lower than our estimates of Rs 46.0 bn on the back of tepid performance in US, India and EMEA markets.

Currently, LPC has OAI status for its 4 plants i.e. (1) Mandideep Unit 1 (No new approval pending for approval); (2) Goa (30-40% of US sales; WL also; 20 pending ANDAs); (3) Somerset (~15-20% to US sales, ~40 ANDA pending ANDAs); (4) Pithampur Unit 2 (WL; 15-20 ANDAs pending for approvals; no new filings since WL). We expect the pending US FDA issues to remain as the key overhang for the...

Sales up across segments barring API: Revenue grew 15% YoY to INR44b (our estimate: INR44.8b). US sales increased 29% YoY to USD218m (39% of sales), while Japan sales were up 18.2% YoY to INR5.9b (14% of sales) led by strong volumes traction. Domestic formulation (DF) sales grew 9.7% YoY to INR13b (30% of sales), mainly led by prescription business (+12.3% YoY)....

With benefits from the last quarter of exclusive sales of gRanexa and slower Change in Estimates | Target | Reco ramp up in Levothyroxyn sales, the adj. sales increased by by 1% QoQ due to muted growth in Japan and declining sales in US (constant currency). Adj....

Q1 core EBITDA was in line at Rs 6bn, normalised for a temporary drop in SG&A; spends and Ranexa FTF.

...

Following a weak 1HFY19, LPC reported a recovery in 2HFY19, ending the year with a ~6% revenue growth, which is likely to accelerate in FY20-21E. The recent launches of gSynthroid/gAndrogel, monetization of the complex generics pipeline (gProair and bEnbrel), supported by ~20 yearly ANDA approvals will drive ~12% revenue CAGR over FY19-21E. Boosted by high margin products, US base business recovery and easing of raw material prices in India, we expect EBITDA margin to expand 100bps annually. With US$ 60mn Solosec revenue expectation, the specialty spend to the tune of US$ 50mn will also be fully absorbed (~2% of sales) in FY21E. Despite being marred by repeated US FDA issues, LPC's visible levers for both revenue and profitability help maintain our positive stance. India franchise, valued at ~Rs 650/sh, continues to protect the downside risk. We maintain a BUY on LPC following in line operational performance in 4QFY19. Our TP is revised at Rs 930/sh (22x FY21E EPS) following a 10% cut in our FY21E EPS to account for higher tax and slower ramp up in Solosec.