Nomura has reiterated a buy on the pharmaceutical company due to increased sales from India and US, as well as robust pipeline of ANDA pipeline that could boost Lupin’s future prospects

Lupin has reported exemplary quarterly results, with 34.7% increase in consolidated net sales for the quarter ended March 2013 at Rs253.74 crore compared to the Rs188.32 crore for the corresponding quarter last year. The pharmaceutical company’s net profits profit grew by 162.2% year-on-year (y-o-y) to Rs40.81 crore during Q4 FY 2012€13 up from Rs15.56 crore for the same period last year.
 

According to Nomura, the good results were driven positive showing from the United States. The strong showing in India surprised too. “The growth in India at 43% y-o-y surprised us positively and strong performance in the US was in line with our expectations. We remain positive given potential of earnings upgrades driven largely by the US opportunities,” said Nomura in their quick note. Nomura, in their quick note to clients, has pegged the stock as a ‘buy’ and fixed a target price of Rs790.
 

Earlier, Moneylife had recommended Lupin as part of its ‘Long-Term’ portfolio at Rs629. Currently, the stock is quoting at Rs725.45 on the Bombay Stock Exchange (BSE).
 

According to Moneylife database, its return on networth and return on capital employed stood at 34% and 28% respectively. Its strong focus on research and development and a strong ANDA pipeline means investors are expecting premium vis-à-vis potential future returns. The market capitalisation is quoting at 27.88 times operating profit.
 

On a consolidated basis, US and Europe formulation sales (including IP) grew by 49% to Rs12,12.3 crore during Q4 FY 2012€13, as against Rs8,15.3 crore during Q4 FY 2011€12, contributing 48% to overall sales. US revenues increased by 33% to$205 million during Q4 FY 2012€13. Four products were launched in the US market during the quarter taking it to a total of 10 products during FY 2012€13.
 

The strength in the US was driven by strong pick up in Suprax, Tricor and higher Cefdinir revenues. The company expects to launch 15–20 products in the US, according to Nomura.
 

On the other hand, the India formulations business contributed 22% of the company’s overall revenues for the quarter. The segment grew by 43% recording net revenues of Rs5,65.9 crore during Q4 FY 2012€13, as compared to Rs3,96.6 crore in Q4 FY 2011€12.

Furthermore, the Nomura’s note states: “As per management, low base of the last year (on supply constraints) and improving sales force productivity is driving the growth. The company estimates the impact of the new pricing policy could range between 3–3.5% of the domestic sales.”
 

Lupin has filed 8 ANDAs and received 10 approvals from the US FDA during the quarter. During the year, the company filed 21 ANDAs and received 14 approvals. Cumulative ANDA filings with the US FDA as of 31 March 2013 stood at 176 with the company having received 78 approvals to date.
 

Debt Equity Ratio as on 31st March, 2013 was 0.14.