Microsoft word - lupin_update.doc

LUPIN – Needs More, HOLD TP INR722, 2.5%
Price & Market Cap data
downside from CMP of INR740.
It was an outstanding FY 2013 for Lupin, as US sales grew ~35% to USD693 million driven by (a) Tricor launch, (b) Suprax sales (due to an intense flu season) and (c) strong currency gains. However, (a) declining Tricor sales due to entry of more players, (b) erosion in Antara sales, (c) a high Suprax base and (d) uncertainty on Yasmin/ Yaz launches, Lupin badly needs at least 2-3 big US launches to deliver 20%+ growth. India slowdown adds to further challenge. While, we believe, Lupin is one of the strongest models in Price chart versus Sensex
the space, near-term upsides may be limited after the recent run-up. We
downgrade stock to HOLD, with a price target of INR722 representing

around 2.5% downside from CMP of INR740. Nice set of numbers
Lupin’s revenues grew approximately 35% to INR25.9 billion, exceeding ours and street’s expectations. Gross margins improved 500-510 bps leading to 610-620 bps improvement in EBITDA margins. Tax also came in lower, leading to approximately 170% growth in profit after tax. The company has expensed off the residual value of INR736m in the quarter pertaining to Intellectual Property (IP) of Antara as the generic version has been launched. Broad based growth
Shareholding Structure :
Revenue growth was largely broad based with robust performance across Mar-13 Dec-12 Sep-12
segments. US grew approximately 35% to USD200 million largely driven by Tricor, which we estimate to have reported revenue in the range of USD45- 50 million. To add further, domestic formulations also grew a robust 45% due to lo base. Emerging markets grew at 50% with modest growth in Japan at 100.0% 100.0% 100.0%
No rush for an acquisition
Suprax remains the key driver for US branded generics. Other brands, Upcoming Investors Events:
especially Antara, face competition from generic entry; revenue growth from AeroChamber in the low teens has been a disappointment; and Allernaze is yet to overcome its manufacturing challenges. With no acquisition, we believe branded US sales will remain flat over FY14-FY15. Financials (Rs in Million) and Multiples
For any further queries please contact:
Tarun Arora, C.A
Ph No. +91-993-084-0634
Source: Company data, Dreams Broking Research This document is the proprietary and exclusive property of Dreams Broking Pvt. Ltd. except as otherwise indicated. No part of this document, in whole or in part, may be reproduced, stored, transmitted, or used for design purposes without the prior written permission of Sutherland. Investors should consider this report as only a single factor in making their investment decision. Snapshot – 4Q13 Results
Exhibit 1 : 4Q13 Profit and Loss Account
(Rs in Million)
Year End March
Delta Remarks
Rs in Million
Gross Profit
Gross Margin
Ahead of estimates due to Antara charge EBIT Margin
Rs.350 million higher due to IP revenues Profit Before Tax
Profit After Tax
Source: Company data, Dreams Broking Research Snapshot – 4Q13 Results
Exhibit 2 : Profit and Loss Account
(Rs in Million)
Year End March
Rs in Million
EBIT Margin
Profit before tax
Net Profit
Source: Company data, Dreams Broking Research Exhibit 3 : Balance Sheet
(Rs in Million)
Year End March
Rs in Million
Total Assets
Total Shareholders' Equity
Total Liabilities
Source: Company data, Dreams Broking Research Exhibit 4 : Balance Sheet
(Rs in Million)
Year End March
Rs in Million
Operating Cash Flow
FCF Pre Dividend
FCF Post Dividend
Cash Inflow / (Outflow)
Source: Company data, Dreams Broking Research Valuation (HOLD, Target Price INR722)
Our price target of INR722 is based on DCF valuation. At current price LUPIN trades
at 21.3x 2014E P/E.
Exhibit 5 : Valuation
FCF to Firm
FCF to Equity
40,983 359,500
Growth Rate
PV Factor
PV of FCF to equity
Market Cap
Target Price
Upside / (Downside)
Source: Company data, Bloomberg, Dreams Broking Research Appendix -1
Company Description
Lupin Limited is a transnational pharmaceutical Company. The Company is engaged
in producing a range of generic and branded formulations and bulk drugs. It
manufactures Active Pharmaceutical Ingredients (APIs) and several drug
formulations. Its product basket consists of formulations from Cephalosporins, CVS,
CNS, Anti-Asthma, Anti-TB, Diabetology, Dermatology, GI, and other therapy
segments. Its APIs products include Cephalexin, Cefaclor, Cefadroxil, Cefprozil,
Rifaximin, Ethambutol, Pyrazinamide, Rifampicin, Rifabutin, Lisinopril, Simvastatin,
Prasugrel, Levetiracetam, Lacosamide, Eslicarbazepine Acetate, Rasagiline
Mesylate, Pregabalin, Flupirtine Maleate and Febuxostat. As on March 31, 2012, the
Company had 19 subsidiaries. During the year ended March 31, 2012, the Company,
through its wholly owned subsidiary Lupin Holdings B.V., Netherlands (LHBV),
acquired 100% interest in subsidiaries, which includes Hormosan Pharma GmbH,
Lupin Philippines Inc. and Lupin Mexico SA de CV.
Sector View
Regulated markets would remain the key sales and profit drivers in the medium term. Japan is expected to emerge as the next growth driver, particularly for companies with a direct marketing presence. We are overweight on companies that are towards the end of the investment phase, with benefits expected to start from the next fiscal. Investment Arguments
In the process of building a strong pipeline for the US market through aggressive
filings, benefits expected to flow over the next couple of years. Strategy of focusing
on niche, low-competition products for the US market likely to benefit in the long run.
Investment Risks
Imperative to enhance profitability of acquired companies which currently have lower margins.
Analyst Certification:
Each of the analyst(s) identified in this report certifies, with respect to the companies or securities
that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the
subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly
dependent on the specific recommendations or views expressed in this report.
Stock Ratings are defined as follows:
Recommendation Expected absolute returns (%) over 12 months Disclaimer: This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or
resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or
use would be contrary to law or regulation or which would subject Dreams Broking Pvt Ltd (hereinafter as DREAMS) to any
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The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. DREAMS has not taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. RCM will not treat recipients as its customers by virtue of their receiving the report. The investments or services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. In addition, nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal recommendation to you. Information and opinions presented in this report were obtained or derived from sources that DREAMS believes to be reliable, but DREAMS makes no representations or warranty, express or implied, as to their accuracy or completeness or correctness. DREAMS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that liability arises under specific statutes or regulations applicable to DREAMS. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment of its original date of publication by DREAMS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. DREAMS does and seeks to do business with companies covered in our research report. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of research produced by DREAMS. Investors should consider our research as only a single factor in making their investment decision.


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