Buy Lupin; target of Rs 670: Sharekhan

Broking house, Sharekhan keeps buy rating on Lupin with price target of Rs 670.

Sharekhan report on Lupin:

Key points

• Lupin has obtained a tentative approval from the US Food and Drug Authority (USFDA) for its abbreviated new drug application for Trandolapril tablets of strengths 1mg, 2mg and 4mg. Trandolapril is prescribed for the treatment of hypertension.
• Abbot Laboratories Plc, USA is the innovator of Trandolapril, which is sold under the brand name MavikĘ. The annual sales of the product in the USA stood at approximately USD 53 million for the twelve months ended July 2006, based on IMS data. The product patent expires in June 2007.
• Lupin would launch the generic equivalent of the MavikĘ tablets in US markets on receiving the final approval from the USFDA. The final permission is expected upon the expiry of the patent protection for the branded product in June 2007.
• Anticipating a 25% market share for Lupin at a 30% price erosion, we expect the product to generate revenues worth Rs27.8 crore (for the eight months after the expiry of the patent in June 2007) in FY2008.
• At the current market price of Rs 582, Lupin is quoting at 14.9x its FY2008E earnings estimate, on a fully diluted basis. Keeping in mind the strong business fundamentals and growth potential of the company, we maintain our Buy recommendation on the stock with a price target of Rs 670.