EUR 120.00 For Business Accounts Only

MOSL: LUPIN (Buy)-Weak 3QFY20-Revival in US sales/cost reduction remains key

Lupin: Weak 3QFY20; Revival in US sales/cost reduction remains key

(LPC IN, Mkt Cap USD4.6b, CMP INR721, TP INR840, 17% Upside, Buy)

 

Strategy of complex product portfolio for US market continues

• LPC is focused on building a niche pipeline for the US market and in process to resolve regulatory issues at its manufacturing sites. LPC intends to grow in the branded domestic formulation (DF) segment by (a) introducing new products, and (b) increasing reach. 3QFY20 EBITDA margins are lowest in last seven quarters, impacted by muted US sales and elevated operational expense.
• We cut our EPS estimate by 7%/11%/5% to factor in delay of (a) potential launches, and (b) realization of benefits due to cost cutting initiatives. We remain positive on LPC based on its healthy ANDA pipeline and improving growth outlook in the branded DF segment. Maintain Buy. 

Weak performance for the quarter

• 3QFY20 revenues were down 4.5% to INR37.7b.
• DF sales (35% of sales) were up 9% YoY to INR13b, LATAM sales grew 15% YoY to INR1.8b, APAC sales were up 26% YoY to INR1.7b, and EMEA sales were up 4% YoY to INR2.9b.
• US sales were down 3% YoY to USD186m (37% of sales). API sales declined 12% YoY to INR3.2b.