23 April, 2014 14:22 IST
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`Buy` Lupin; target Rs 521: Emkay
Source: IRIS Exclusive (25-JAN-12)
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Emkay Global Financial Services has maintained `Buy` on Lupin with a price target of Rs 521 as against the current market price (CMP) of Rs 446 in its report dated Jan. 24, 2012. The broking house gave the following rationale:

Revenue growth led by robust domestic biz and Rupee depreciation:

> 30% growth in domestic business driven by strong organic growth (23% growth) and contribution from Lilly deal (Rs 270 million)

> US Formulations witnessed growth of 23% in INR and 12% in USD (18% growth in branded & 9% in generics), with launch of 3 OC`s

> Growth in branded formulation was led by Suprax (grew by 21%) and Antara (grew 8%)

> Company has withdrawn it`s at risk launched product Fortamet on back of Preliminary Injunction. Thus company’s 180 days is at risk:

> Japan biz grew 43% INR growth (23% excluding I`rom) and 22% Yen growth

> Emerging Markets (South Africa, Philippines ) also witnessed growth of 42% Margin expansion led by INR depreciation which is not sustainable

> EBITDA margins expanded 85bps YoY and 327bps QoQ to 20.5%

> PAT margins contracted 191bps YoY due to increase in depreciation, interest and tax and improved 18bps QoQ to 12.9%

Going forward

> In the US, Lupin has guided for 25 ANDA launches in FY13 including 10 OCs. Management has also guided for launch of Yaz and Yasmin to happen in FY13

> New launches in US like Solodyn (45, 90, and 135mg), Tricor, Combivir and Seasonale will lead to 33% CAGR in base US business over FY11-14E

> In the domestic segment we expect company to witness strong growth at 15% CAGR for FY12-FY14E

Valuations:

We expect Lupin to report 19% revenue growth in FY12E, 25% growth in FY13E and 15% growth in FY14E. We expect EBIDTA margins to move from 20.4% in FY11 to 18.8% in FY12, 19.7% in FY13 and 20.6% in FY14. Earnings will grow by 21% CAGR over FY12-14E. We maintain Buy on the stock with a target price of Rs521 (20x FY13E earnings). At CMP, the stock is trading at 21x FY12E and 17x FY13E EPS.

Click here to view full report

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