Buy Lupin; target of Rs 600: Emkay

“Lupin’s US business to double to USD 1 billion in next 3 years on back of more than 100 new product launches which will include 27 OCs n In next two year company is expected to launch many high profile products like Tricor, Seasonale, Solodyn, Ambien CR, Yaz, Yasmin, Cymbalta, Asacol and Cipro OS which will lead to 25% CAGR in US business over FY12-14 n In India business, company is expected to grow by 18-20% led by Cardiac, CNS and Diabities. Growth in Japan business will be boosted by hospital segment driven by I’rom acquisition.”

“Lupin has the first mover advantage in the Japanese market through its 100% subsidiary Kyowa Pharmaceuticals which has a strong presence in neurology, cardiovascular, gastroenterology and respiratory segments. Kyowa has a product portfolio of over 200 products with a strong sales and marketing team. In order to increase the traction in the hospital segment where generic penetration is higher, Lupin acquired I’rom in Nov 2011. I’rom is a USD75mn company with EBITDA margins in the range of 8-9%. Currently, the Japanese pharmaceutical market is the second largest in the world and is valued at USD80bn growing at an annual rate of just 6%. Acceleration in growth depends on how fast the generic penetration happens. With increasing burden on the government to reduce the healthcare cost, Lupin expects the generic penetration in Japan to increase from existing 20% to 40% over the next 5 years. Company is planning to launch 11 new products in FY13 with 3 formulations being sourced from India. We expect contribution of Japanese business to increase from 12% to 14% in FY13 with revenues growing at 26% CAGR over FY12-14E.”

“We expect Lupin to report 20% revenue growth in FY13E and 17% growth in FY14E. We expect EBIDTA margins to move from 20% in FY12 to 20.5% in FY13E and 20.8% in FY14E on back of strong growth in US and India. Earnings will grow by 22% CAGR over FY12-14E. We maintain Buy on the stock with a revised target price of Rs600 (20xFY14E base EPS of Rs30). At CMP, the stock is trading at 21x FY13E and 17x FY14E EPS,” says Emkay Global Financial Services research report.  

Institutional holding more than 40% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.