Lupin Ltd. share price target

Elevated staff cost post Gavis acquisition and higher than expected R&D expenses (13.3% of sales) led to a surprise sequential drop in margins at 25.0% in 2QFY17. As a result, net profits declined 15%YoY to Rs 6.6bn, despite lower taxes during the quarter. On the flip side, revenue performance was buoyant with robust US sales.

ICICI Securities Ltd | Retail Equity Research Revenues grew 29% YoY to | 4291 crore (I-direct estimate: | 4204 crore) mainly on account of 73% growth in US sales to | 1998 crore (I-direct estimate: | 1920 crore). Strong US sales were due to Gavis consolidation and gGlumetza/gFortamet (anti-diabetic) traction EBITDA margins improved 406 bps YoY to 24.0% (I-direct estimate: 28.3%) mainly on account of a strong gross margin performance. EBITDA grew 55% YoY to | 1028 crore lower than I-direct estimate of...

Lupin (LPC) has missed our estimates in 2QFY17 due to lower-than-expected sales from US & India and higher other expenses. Its Sales, EBITDA & PAT grew by 29% yoy, 55% yoy & 58% yoy to Rs42.9bn, Rs10.3bn & Rs 6.6bn, respectively led by Gavis consolidation, revenue contribution from gGlumetza & gFortamet in the US. Its US sales declined by 9% qoq to US$292mn in 2QFY17 from US$322mn in 1QFY17 due to Mylan entry for Fortamet and weak sales in branded segment sales. Japan grew 10.4% yoy in CC terms (35% yoy in INR terms) due to favourable Yen currency. Its EBITDA margin dipped 530bps qoq to 24% from 29.3% in 1QFY17 due to launch of Mylan's gFortamet, price erosion in base product...

Lupins revenues increased 32% YoY to Rs 42.1 bn in Q2FY17 marginally lower than our estimates of Rs 43 bn on back of better performance in US, Kyowa APAC, LATAM and ROW business. Operating margins increased by 406bps YoY to 23.9% (lower than our estimate of 26%) due to higher R & D and forex loss. Net Profit grew by 58% YoY to Rs 6622 mn in line with our estimates of Rs 6671 mn.

US business grew 73.1% YoY to Rs20 bn on the back of the generic Glumetza and generic Fortamet. However, management guided that post the entry of competition in generic Fortamet Lupin lost 6% market share and reduced prices in September, however expects on an annualized basis Fortamet to contribute substantially. As there was no increased competition in generic Glumetza, company managed market share, however, we think newer competition is expected in Q3FY17. In regards to the base business, a single digit price erosion was as per expectations. We remain positive on the overall US business with 1) clearance of all anomalies regarding its Goa facility by US FDA which would see a ramp up in approvals and subsequent launches (management guided for...

LUPIN revenues grew 40.7% YoY to | 4439.4 crore (I-direct estimate: | 4652.8 crore) mainly due to 83.8% growth in US sales to | 2188.6 crore (I-direct estimate: | 2502 crore). Strong US sales were due to Gavis consolidation, robust sales in Metformin (anti-diabetic). Domestic sales grew 5.2% YoY to | 931.3 crore. (I-direct estimate: | 849.7 crore).EBITDA margins improved 333 bps YoY to 29.5% (I-direct estimate: 33.0%) mainly on account of a strong gross margin performance. EBITDA grew 58.6% YoY to | 1308.0 crore .Net profit grew 55.1% YoY to | 882.0 crore (I-direct estimate: | 930.4 crore) owing to a strong operational performance. ICICI Securities Limited remain upbeat about the FY18 prospects and maintain BUY with a target price of | 1890 based on 25xFY18E EPS of | 75.5.

Trendlyne has 18 reports on LUPIN updated in the last year from 8 brokers with an average target of Rs 1773.9. Brokers have a rating for LUPIN with 5 price downgrades,2 price upgrades,1 upgrade in past 6 months and 1 downgrades,7 price downgrades,2 upgrades,4 price upgrades in past 1 Year.

Top takeaways from Q1FY17 : Reported in?line sales performance by delivering healthy 40% yoy growth. That was mainly led by strong gGlumetza/gFortamet and Gavis integration in US. EBITDA missed 200bps to our estimate despite strong US sales, due to price erosion in US, expansion in domestic field force (by 1000 nos in Q4) and one?off IND?AS led inventory adjustment in Gavis. Guides for 25 ANDA launches in US in FY17 but expects delayed launch of key products like – gRenvela, gRenagel and gWelchol in FY18 (vs. H2FY17 earlier) and continued pricing pressure sequentially. Also lacks clarity about complete resolution of 483 in Goa. Hence, Phillip Capital cut FY17/FY18 US sales estimates by 7% and earnings estimates by 4%. Thus reduce their TP to Rs 1650 (3% upside), i.e 22x FY18 vs. Rs 1710 earlier and remain Neutral.

Trendlyne has 18 reports on LUPIN updated in the last year from 8 brokers with an average target of Rs 1773.9. Brokers have a rating for LUPIN with 5 price downgrades,2 price upgrades,1 upgrade in past 6 months and 1 downgrades,7 price downgrades,2 upgrades,4 price upgrades in past 1 Year.

Lupin's revenues increased 41% YoY to Rs 44.4 bn in Q1FY17 in line with our estimates of Rs 44.1 bn on back of better performance in US, Kyowa APAC, LATAM and ROW business. Operating margins increased by 354bps YoY to 29.4% (higher than our estimate of 29.1%) aided by operating income of Rs 1.3 bn. Net Profit grew by 55.1% YoY to Rs 8820 mn as against our estimates of Rs 7227 mn.

Background: Amongst the largest Pharma companies in domestic market with Net Sales of INR 112.9bn with a strong brand portfolio. R&D; cost is in excess of 8% of Sales. Exports account for 73% with Developed Markets (DM) at 58% and EM at 15%. Sales Mix: API - 10%, Domestic Formulations - 25%, DM Formulations - 56%, EM Formulations - 9%. Historically strong in anti-TB segment, has built expertise in fermentation based products and segments like...

Lupin's (LPC) 1QFY17 revenues of INR44.3b (+41% YoY) were in line with our estimate. EBITDA margin of 29.5% was ~300bp below our estimate due to lower-than-expected sales from gGlumetza, one-time impact of ~1% from accounting of Gavis inventory at fair value and higher employee costs (+42% YoY). However, PAT of INR8.8b was higher than our estimate due to a lower tax rate of ~23% in 1Q (full-year guidance of ~27-28%). Motilal Oswal maintain Buy with a TP of INR1,850 @ 23x FY18E PER (v/s INR2,000 @ 25x FY18E PER). Their EPS estimates largely remain unchanged.