Lupin is the fifth-largest Indian player in the branded generics (Pharma) market of the US. The company has been reporting high earnings per share growth of 37 per cent (annualised) in the past five years. RoCE stands at 30 per cent.
Strong momentum: Q1FY13 saw Lupin maintaining its momentum. Topline grew 44 per cent (y-o-y) while Ebitda (excluding one-off items) grew by 21 per cent. The company’s gross margins at 63.1 per cent were higher than the 60 per cent it reported in the corresponding period of the previous year.
Formulations strength: Formulations exports grew at 52 per cent. US grew at a smart 63 per cent (40 per cent in dollar terms). The management has guided strong traction in the US business led by new launches (subject to US FDA approvals), commercialisation of oral contraceptives portfolio and other opportunities. Lupin filed three abbreviated new drug applications (ANDAs), taking its total ANDA filings to 176 of which the company has received approvals for 65. The company plans to file over 30 ANDAs in FY13 while 20 ANDAs could see their launches this year and another 80 are expected to be launched in the next three years.
Indian formulations (20 per cent of total sales) was up 25 per cent. The management has guided that domestic formulations should continue to see a growth of at least 20 per cent till FY14.
US opportunities: The company has filed for 31 OC products in the US. Also, in the filings are ophthalmological and soon to be filed dermatological products. Lupin expects that it will be able to commercialise its OC pipeline by FY14 while some ophthalmological products are expected to be commercialised only in FY14.
Eastward ho! Its second-biggest international market, Japan, reported a 100 per cent growth on the back of the Irom acquisition and a favourable currency. The company intends to shift its production from Japan to its facilities in India. This shift, to be done in two phases, is expected in the long run to help Lupin improve its profitability in the Japan business. According to analysts, Japan should grow at around 10-12 per cent in the coming quarters.
Outlook and valuations: Lupin’s key growth drivers in the next couple of quarters would be strong growth pipeline in the US and improved performance in Indian formulations. There is also the possibility of inorganic growth. The company has expressed its intention to gain access to high-end technologies and/or brand acquisitions especially in emerging markets like that of Latin America. The stock trades at a PEG of around 0.76. Analysts tracking the stock say the company should be able to report EPS growth of upwards of 20 per cent in the next two years.Buy.
This article was originally published on October 18, 2012.
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