Lupin Ltd. share price target

Progress on US-China trade deal lifted global markets. Global equity markets and yields rallied and dollar rose for the first time in 4 weeks. However, growth concerns continue as China's exports fell and GDP moderated further in Q4. Indian yields also rose, even as retail inflation cooled-off in Dec'18 to 18-month low. Higher crude prices and anticipation of an expansionary budget drove yields higher. INR depreciated by (-) 1% amidst FII outflows...

Maintain BUY with a TP of Rs 1,030 (22x FY20E EPS). Lupins (LPC) performance in 2QFY19 was in line with our expectation, with revenue at Rs 39.51bn, flat YoY/ up 3% QoQ (in line). EBITDA Margin at 13.9% was down 767bps YoY/ up 24bps QoQ primarily on the back of higher spend for specialty business in the US and lowered profitability of US generic business. PAT at Rs 2.66bn was down 42% YoY.

Lupin's Q2FY19 results were operationally weak while net profit was above I-direct estimates mainly due to forex gains. Revenue growth was flat YoY at | 3951 crore (I-direct estimate: | 4032 crore). US...

ff US Biz (32% of Sales): The Management expects the US sales to report strong growth in 2HFY19E led by new launches (gLevothyroxine & gRanexa), pick-up in gTamiflu/ Cephalosporin sales led by upcoming flu season and ramp-up in Solosec sales. With lower sales in 1HFY19, LPC expects its US sales at lower end of earlier guidance of US$800-850mn in FY19E. On positive note, the Management indicated that pricing pressure has been moderated in the US due to exit of MNCs in unviable products. Notably, gLevothyroxine launch is postponed to 4QFY19 vs. earlier guidance of 3QFY19. ff Women's care brand i.e. Solosec contributed US$3mn to sales, LPC aims to achieve 15-20%...

We lower our revenue/adj.PAT estimates for FY19E by 14%/46% to factor in sustained pricing pressure in key products in the US, delay in meaningful product launches, intense competition in generics, weak growth in Japan and higher input costs. We maintain our HOLD' rating on the stock with a revised rolled over target price (TP) of Rs. 849 based on 18.5xFY20E EPS (18xFY19E earlier). US pain continues; Expects recovery in FY20E Lupin's revenue growth remained flat YoY in Q1FY19 as strong 28% YoY growth in domestic formulation sales (~32% of sales) was offset by weak 26% YoY decline in US sales (31% of sales). The subdued...

Revenue fell by 5.13% to Rs. 3774.57 Cr in Q1FY19 when compared to the previous quarter. Lupin Ltd Q1FY19 results Comment

Lupin's Q1FY19 results were below our expectations. Continuing US pain resulted in flat topline but EBITDA fall of 36.8%YoY and APAT down 66%YoY to Rs1 bn. Sales de-grew by only 0.8% YoY desspite a YoY dip in US sales by 26% and ROW by 30.3%. It got cushioned by stronger sales growth in India, EMEA and API. Sales was down 0.8%YoY/5.1%QoQ to Rs37.7bn(8.9% below IDBIest.) and EBITDA margins were at 11.8% vs our estimates of 19.6%. We expect domestic growth to be ahead of industry at 14-15%, while the US business pain to persist....

ff US Biz (31% of Sales): The Management expects the US sales in 2QFY19 to remain similar to 1QFY19 level, which is expected to revive in 2HFY19 led by new launches (gLevothyroxine, gTamiflu and gRanexa). It expects the US sales to remain in US$800-850mn range in FY19E. Pricing pressure to base business remains at high-single digit. Cumulatively, LPC filed 402 ANDAs (Approved-240; Pending-162). LPC now has 38 FTF opportunities. ff Woman care brand Solosec (Secnidazole - API) exceeded LPC's expectations owing to very good response. Net price for Solosec stood at US$170/dose (post rebate) vs. list price of US$270/dose. It aims to achieve 25% market share over next 3-4 years....

We maintain Buy rating on Lupin with TP to Rs920 (earlier Rs930) based on 23x March'20 EPS of Rs40.0. Lupin's Q1FY19 results were lower than our and consensus estimates due to pricing pressure in the US generic market. Lupin's revenue was flat YoY, margin declined 620bps to 13.7%, and net profit declined by 43% YoY. The pricing pressure in the US has eased out due to discontinuation of several generic products by Teva and Sandoz. We believe the company's robust growth across key markets coupled with its strong pipeline of 162 pending ANDAs with US FDA will drive future growth. The key positive risk to our assumptions would be strong...