MOSL: LUPIN (Buy)-US biz bottomed in 2Q-2H to be better than 1H

Lupin: US biz bottomed in 2Q; 2H to be better than 1H

(LPC IN, Mkt Cap USD8.6b, CMP INR1028, TP INR1215, 18% Upside, Buy)

• Lupin's (LPC) 2QFY18 revenue declined ~8% YoY to INR39.5b (~4% miss). Although US formulations revenue declined 32% YoY, non-US formulations revenue grew 17% YoY. EBITDA declined 17% YoY and +11% QoQ to INR8.5b (3% miss), while margin came in at ~21.6% (-240bp YoY/+170bp QoQ). Reported PAT declined 32% YoY to INR4.55b (In-line with estimate).
• US business - recovery expected from 2HFY18: US business sales came in at USD204m v/s USD238m in 1QFY18 and USD292m in 2QFY17. Significant sequential decline is attributed to new competition in Glumetza, loss of Minastrin exclusivity, and renegotiation of prices under the Claris 1 (Walmart- Mckesson collaboration) program. LPC expects US sales to bottom in current quarter, as the base business price erosion is likely to be in high-single-digit v/s double-digit since the last 12-18 months. A few key launches likely in 2HFY18 are Synthroid (4QFY18E end/1QFY19E beginning), Axiron (next two months), Tamiflu (4QFY18 launch), Hydrocodone APAP (2Q) and Oxycodone APAP. Solosec, Renexa, Coreg CR and Prevacid ODT launches are expected in FY19.
• Domestic business - strong growth to continue: India business sales grew 16% YoY (+24% QoQ). On a like-to-like basis, sales grew 20% YoY (adjusted for excise duty impact). LPC expects the domestic business to grow at 15% YoY in 2HFY18.