MOSL: LUPIN (Buy)-Weak 4Q-Guides for muted FY18
Lupin: Weak 4Q; Guides for muted FY18
(LPC IN, Mkt Cap USD8.2b, CMP INR1228, TP INR1475, 20% Upside, Buy)
- Lupin’s (LPC) 4QFY17 revenue grew 2% YoY to INR42.5b (~6% below est.). The miss in revenue is primarily attributed to weak US sales (-13% YoY/QoQ). Despite this, gross margin expanded ~120bp QoQ to 72.1%. Excluding the one-time impact of INR3.3b (related to provisioning against patent litigation and forex loss), EBITDA declined 15.3% YoY to INR11.1b (3% below est.), with the margin at 26% v/s our estimate of 25.2%. R&D expense stood at 16% of sales, higher than the normalized rate of 12-13%.
- FY18 growth expected to be muted: LPC delivered revenue/EBITDA growth 23%/24% in FY17, led by Fortamet/Glumetza ramp-up. However, revenue growth in FY18 is expected to be ~8% YoY, with flat EBITDA. We expect US business to decline ~5% YoY in FY18 due to new competition in the diabetes portfolio, further channel consolidation (impact of which will be visible in 2H) and likely deferral of key approvals for products like sevelamer/co-sevelamer to 2HFY19. EBITDA margin is expected to shrink to 24.8% in FY18 (v/s management guidance of 26-28%) as it will be difficult to compensate for the loss of the high-margin US business.
Lupin is a pharmaceutical company. Co. produces, develops, and markets a range of branded and generic formulations and active pharmaceutical ingredients (APIs) in India, the United States, and Japan. Co. offers various formulations for use in the areas of cephalosporin, cardiovascular (CVS), central nervous system (CNS), anti-asthma, anti-tuberculosis, diabetology, dermatology, gastro intestinal, and other therapy segments; and APIs for use in therapeutic areas of antibiotics, anti-tuberculosis, CVS, CNS, analgesics, and anti-gout. Co. also develops and out-licenses its drug delivery technologies and platforms; and creates and develops biosimilars for various therapeutic indications.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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