MOSL: LUPIN (Buy)-Exclusivity led operational performance-niche launches remain key
Lupin: Exclusivity led operational performance; niche launches remain key
(LPC IN, Mkt Cap USD5b, CMP INR783, TP INR930, 19% Upside, Buy)
- US/domestic formulation drive revenue growth: Sales increased 9% YoY to INR44b (in-line), led by the US (+10% YoY to USD245m; 39% of sales) and domestic formulation (+9% YoY to INR10.5b) businesses. However, the performance was partly dragged by muted growth in APIs (+3.7% YoY to INR3b) and a decline in EMEA/LATAM (-3.3%/-16% YoY to INR3.4b/INR1.4b).
- Margin improvement with better product mix; higher tax hurts earnings: Gross margin (GM) expanded 180bp YoY/370bp QoQ to 68%, largely due to niche launches in the US market. EBITDA margin expanded 350bp YoY (+500bp QoQ) to 21.1% (our estimate: 17.7%) on account of a better product mix and lower other/R&D expenses (-80bp/-100bp YoY). Employee cost was stable YoY. Absolute EBITDA was up 31% YoY to INR9.3b (our estimate: INR7.8b). Tax rate came in at 50.4% for the quarter. LPC incurred a forex loss of INR580m - adjusting for this, PAT was down 14% YoY to INR3.3b (our estimate: INR4.4b).
- Concall highlights: (a) g-Proair US launch likely in 2HFY20. (b) Received approval for Etanercept in Japan; plans to launch in both Japan and EU (under review) in 2HFY20. (c) Launched levothyroxine at end-4QFY19. (d) Solosec ramp-up has been slower than expected in the US. (e) Guided for 20+ ANDA launches in FY20.
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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