We maintain ?buy? rating on Lupin Ltd with a one-year target of Rs 1,100. Our target price implies the stock will trade at 23.4x FY15 price-to-earnings (P/E). We are 5% ahead of FY15 consensus. The stock remains our preferred pick in the pharmaceutical space.
After much delay, Lupin got US Food and Drug Administration (FDA) approval and launched Trilipix (LTM IMS Sales: $500 million). We believe the market is attractive as Lupin is only the fourth generic. However, we are building in only $9 million and $18 million of revenues for FY14 and FY15, respectively. Trilipix contributes 2% and 3% of our FY14 and FY15 EPS, respectively. We maintain our FY14-15 EPS estimates. We continue to see strong growth momentum for Lupin with potential launch of Trizivir and Niaspan (semi-exclusive) in Q4 FY14. We expect Lupin to continue to trade at a premium to the sector given strong 23% EPS CAGR over FY13-16 period.
Lupin management believes focus on tough to manufacture products should help continue to drive US growth like Opthalmics, derma. The company is setting up research centres in the US to focus on complex injectables, controlled substances and inhalers for generics as well as derma and inhalation for US speciality business. The company, however, does not expect R&D to significantly step up from current run rate of ~8% (as percentage of sales). Lupin is also interested in acquiring manufacturing facilities in the US market.
