We maintain ‘buy’ rating on Lupin with a revised target price of Rs 1,630 valuing the stock at 22x FY17e EPS. Lupin is our top pick among large cap pharma companies. We marginally lower our sales and ebitda estimates for FY15e-17e. While Q2FY15 missed estimates operationally, the long-term growth drivers continue to be in place. We estimate core EPS of Rs 48/ Rs 60.9/ Rs 73.8 for FY15e/ FY16e/ FY17e — 34% EPS CAGR for FY14-17e.
Lupin’s Q2FY15 numbers were below estimates on the operational front. Sales grew 18.4% y-o-y to Rs 3,120 crore (3% miss), ebitda 25% y-o-y to Rs 770 crore (7% miss), while reported PAT grew 57% y-o-y to Rs 630 crore (25% beat).
Revenue growth was driven by 20% y-o-y growth in India (estimated 16%) and 23% y-o-y growth in the US (estimated 40%). US generics declined sequentially due to pricing pressure in products launched over the last two to three quarters.
The company expects the US generics to grow 20-22% due to a rich generic pipeline. Lupin expects its US branded business to contribute 30% to the overall US sales over the next few years. Indian formulations to grow 16-18%. In Japan, Irom to report good numbers from next fiscal and Kyowa will maintain 15% growth in constant JPY, despite recent price cut. Overall ebitda guidance maintained at 28-30% for FY15.
By Motilal Oswal