Lupin Rating: Final quarter a mixed bag for company

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Published: May 19, 2018 1:39:27 AM

Lower margin assumptions behind 7/3% cut in EPS for FY19-20e; TP down to Rs 800.

Lupin, OTC segment, Anil Kaushal, Softovac, Nilesh Gupta, West Bengal, OTC products, india, mumbai, news of lupin, latest news on lupinLPC’s Q4FY18 revenues were in line with our estimates, with the US showing signs of stability.

LPC’s Q4FY18 revenues were in line with our estimates, with the US showing signs of stability. Gross margins exceeded expectations, but Ebitda missed estimates by 9% due to higher SG&A spend, primarily related to Solosec promotion and remediation costs, which offset lower R&D. There was mixed progress on pipeline as LPC filed a P-IV on Spiriva in the US as well as Enbrel biosimilar in Japan, though it has put Advair on hold. Reduce with a revised target price of Rs 800/share.

FY19 to be thin; mixed progress on pipeline: LPC management remains optimistic on the US market, and suggested that pricing is finally bottoming out for the commodity end of the basket, though we do not expect a sharp recovery in pricing in the near term.

Given the sharp erosion in Fortamet/Glumetza in FY18, product concentration has come down dramatically, though the near-term launch pipeline remains weak, with Ranexa exclusivity being the only key launch expected in FY2019, apart from Solosec in the branded space. Levothyroxine remains a wild card. LPC filed a P-IV ANDA on Spiriva in Q1FY19, its first DPI filing in the US.

Lupin, OTC segment, Anil Kaushal, Softovac, Nilesh Gupta, West Bengal, OTC products, india, mumbai, news of lupin, latest news on lupin

Valuations reasonable, though estimates factor in a full recovery: We tweak our FY19-20 EPS by 7/3%, largely on account of lower Ebitda margin assumptions. LPC is trading at 22X FY19 and 17X FY20 EPS, though EV/Ebitda multiples are now reasonable at 11X FY19 and 9X FY20 EV/Ebitda. Revised target price of Rs 800 values LPC at 18X FY2020 EPS.

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