634040728218637500_indian pharmaceutical- riding on patent expiry[2].pdf

7/27/2019 634040728218637500_Indian Pharmaceutical- Riding on Patent expiry[2].pdf

1/20

12March,2010

ResearchAnalyst

SouvikChatterjee

Tel:+912261596410

[email protected]

BPEquitiesresearchavailableonBloomberg BPEP

(Source:IMS)

SectorOutlook

Bullish

B P EQUITIES

INSTITUTIONAL EQUITIESIndian Pharmaceuticals- Riding High on Patent Expiry

INDIAN HEALTHCARE

InstitutionalSales

DivyaAroraJhangiani

Tel:+912261596404

Email:[email protected]

Weinitiate

coverage

on

the

Indian

pharmaceutical/healthcare

sector with a bullish note on the back of huge patent expiry

opportunityintheUSAalongwithothermarket.Whileitismuch

talkedaboutthatthepatentcliffwon'thituntil2011(FY12),we

view 2010 (FY11) will see patent expirations of some of the

industry's blockbuster drugs with a total market size of

~US$25bn (Rs115,000cr) and would be the beginning of the

goldenopportunitycoming.

Bigopportunity:We view FY10FY15asbeing theGolden years

fortheIndianhealthcareindustry.TheIndiandrugcompaniesare

hugelydependentonthelargestpharmamarketintheworld,the

USA,amountingnearlyahalfofthetotalpharmasalesby Indian

companies.Weforeseeatremendousopportunityforthe Indian

genericcompaniestocashintheUS$150bn(Rs700,000cr)worth

ofpatent expiryopportunityintheUSAalone.

BigBoysloosingpatents:With an estimated US$25bn

(Rs.115,000cr)worthofpatentopportunity,thereareanumber

ofblockbusterdrugs goingoffpatent inFY10.TheTop10drugs

going off patent in FY10 are: Cozzar/Hyzzar (Merck), Protonix

(Wyeth),Flomax

(Boehringer

Ingelheim),

Arimidex

(Astrazinca),

Climara (Bayer), Inverase (Roche), Hycamtin (GSK), Aricept

(Eisai),Levaquin(OrthoMcNeil)andGemzer(EliLilly). OurFY10

patent expiration list includes drugs whose patent actually

expires, but managed to get a sixmonth extension due to

pediatricexclusivity.

(Source:Bloomberg,BPInstitutionalResearch)

Genericdrugsales

Target

P/E

(x)

EPS

(Rs.)

RoE

(%)

EV/EBITDA

(x)

Rs. FY11E FY10E FY11E FY10E FY11E FY10E FY11E

SunPharma 1900 22.5 62.1 72.9 17.0 17.8 26.0 23.0

Dr.Reddy'sLab 1340 18.4 52.0 63.6 22.0 26.0 9.0 7.1

Ranbaxy* 552 32.2 14.1 21.7 13.5 17.8 18.6 13.8

Lupin 1970 16.8 72.5 93.4 35.3 32.4 16.7 13.2

Valuationsummary:

*CYforRanbaxy

THEMATIC


2/20

Page2

ListofContents

IndiaPharmaceuticals

[email protected]

SL No. Page No.

1 Indian Pharmaceutical- Riding High on Patent Expiry 1

2 Golden Opportunity Ahead For Indian Pharmaceutical Industry 3

3 Generic market- Highly Price Competitive 4

4 2010-2015: A US$240 billion opportunity 4

5 Are the Indian Pharma companies ready? 5

6 Stupendous market opportunity for Indian companies 5

7 The Obama Healthcare bill to add generic market size 6

8 Generic acceptability in the US 7

9 Cost- Benefit analysis of Generic Drugs 8

10 Year wise drug patent expiry in the USA 9

Companies

Sun Pharmaceuticals 11

Dr. Reddy's Lab 13

Ranbaxy Labs 15

Lupin 17


3/20

Page3

(Source : Bloomberg, BP Equities Institutional research)

GoldenOpportunityAheadForIndianPharmaceuticalIndustry:

TheUSaccountsfornearly45%oftheglobalpharmasalesandnearlythe

same for the Indian drug companies as well. This decade (20102020)

provides a huge opportunity to the Indian generic companies in term of

market opportunity. An estimated US$240bn (Rs18,00,000cr) worth of

drugsgoingoffpatentwithinaperiodofnext5yearswithanaverageof

US$48bn(Rs220,000cr)perannum.

AccordingtoMcKinsey&Companytop20pharmaceuticalcompanies,the

averagepatentexpiryislikelytofallby58%fromUS$48bn(Rs220,000cr)to

US$16.5bn (Rs75,000cr)perannumbetween20162020.Weexpect2010

2015 to be a golden period for Indian generic companies to gain from

patentexpiry.

Fig1:Blockbusterdrugsgoingoffpatentbetween201015

US$150bnworthofdrugs

going offpatent within a

period of next 5 years

with an average of

US$48bnperyear.


[email protected]


4/20

(Source : Bloomberg, BP Equities Institutional Research)

Page4

Genericmarket HighlyPriceCompetitive:

The Indian pharmaceutical companies are likely to face stiff competition

from other international players likeActavis, Cobalt,Genpharm, Invagen,

Mylan,Roxane,SandozandWatsonwhoarealsolikelytoenterthegeneric

pharmaplay

in

amajor

way.

We

expect

the

launch

of

authorized

generics

bypatentholdersandotherglobalgenericgiantswouldaddupcompetition

andpricewarsinthegenericpharmaspaceintheUS.DrugpricesintheUS

and other developedmarketwhere the formulation patents are likely to

expire, are likely to fall sharply post the patent expiry. The price of the

genericsis40%60%lowerthanthepriceofthepatentedproductresulting

inhugepriceerosionofthedrug.WeexpecttheintegratedIndianpharma

companies to gain significantmarket share in theUS due to the pricing

advantage.

20102015:

A

US$240

billion

opportunity:

Mostoftheblockbusterdrugspatentsaresettoexpirebetween2010and

2015havingacumulativesalesof~US$240bn(Rs11,00,000cr.).Thiswould

imply an average market opportunity of US$48bn (Rs180,000cr.) per

annumwhich isnearlytheaggregateofthetop Indianpharmacompanies

annualsales.However,thepriceofthebrandeddrug is likelytoshrinkby

over90%onpatentexpiry,whentheproductsbecomegeneric.TheIndian

generic players can look forward to an average potential of Rs120,000

150,000crperannum.

Price of the generics is

400%60% lowerthanthe

priceof

the

patented

product resulting in huge

priceerosionofthedrug.

Fig2:Patent

expiry

opportunity:

2010

2020

(US$

Bn.)

Average market opportu

nity of US$48bn/year

which is nearly the

aggregate of the top

Indianpharmacompanies

annualsale.


[email protected]


5/20

Page5

AretheIndianPharmacompaniesready?

We believe that the Indian pharmaceutical companies are well on the

course of being a global player especially in the generic pharma space.

MostoftheIndianpharmacompanieshaveverystrongpresenceintheUS

market, have near about thousand ANDAs (Abbreviated New Drug

Approvals)filedwiththeUSFDAwhichincludesmorethan50FTFs,highest

byanycountry.

Indian companies have over the years matured in the US healthcare

businessandhavebeen successful inchallengingpatentsand successfully

claimed their right of 180days marketing exclusivity under the Hatch

WaxmanAmendments.TheIndiancompaniesedgeouttheirglobalpeersin

terms of cost efficiency as Indian generics are 1525% cheaper than

manufacturedbyothercompanieselsewhere.

StupendousmarketopportunityforIndiancompanies:

We see the next five years as a stupendous growth opportunity for the

Indian pharma companies particularly in the US and other developed

markets. The aggregate marketable opportunity for Indian pharma

companies would be in the range of US$750bn790bn (Rs350,000

360,000cr). We expect a cutthroat price competition among the Indian

pharma companies in theUS genericmarket asmultiple companieshave

beengrantedANDAincludingParaIVapprovalforthesamemolecule.

Weexpect theBigPharma (Top5) Indian companieswouldbe themajor

beneficiariesof thepatent expiryopportunity.Dr.Reddys LabsUS$90bn

(Rs400,000cr),

Cipla

US$61bn(Rs280,000cr),SunPharma

US$33bn(Rs150,500cr), Lupin US$52bn(Rs230,000cr) and Ranbaxy US$ 50bn(Rs

230,000cr) are as per our research, the important gainers of this

opportunity.

Fig3:MarketopportunityforIndianpharmaceuticalcompanies

(Source:Bloomberg,BPEquitiesInstitutionalResearch)

Indiapharma companies,

have more than 50 FTFs

filing with the USFDA

highestbyany country.

Theaggregate

marketable

opportunityforIndian

pharmacompanieswould

beintherangeofUS$

750bn790bn


[email protected]


6/20

Page6

TheObamaHealthcarebilltoaddgenericmarketsize:

The US Presidents new healthcare reform program aims to provide

coverage for thenations46millionuninsured, to improve thequalityof

care,andconstrainthegrowthofhealthcarespending.TheUSgovernment

plansUS$650700billion spending formaking the systemmore efficient

andcosteffective.

With respect to the Indianpharmaceutical industry, thenewprogramwill

expand the market by extending access to the presently uninsured. In

addition,theplanwillseektoachievesavingsbyfocusingoncosteffective

therapiesdeterminedthroughnewcomparativeanalyticaltools.Ingeneral,

thisapproachshould leadtogreaterutilizationofgenericdrugs insteadof

moreexpensiveformulationmedicines.

(Source:BPEquitiesInstitutionalResearch)

Fig4:Cost

comparison:

Branded

vs.

Generics


[email protected]

TheUSgovernmentplans

US$650700billion spend

ing leading to greater

utilization of generic

drugs.


7/20

(Source:EpocratesFeb2009,BPEquitiesInstitutionalResearch)

Page7

GenericacceptabilityintheUS:

Inasurveyconductedby theEpocrates inFeb2009, ithasbeenobserved

that 22% of the respondents medical practitioners prefer generic drugs.

Though stillmore than75%of the respondedopted for thebranded, the

genericdemand

is

in

the

rise

mainly

because

of

the

cost

advantage.

We

expectgenericdemand togrowby2530%over thenext5yearsasmore

andmorebrandeddrugpatentexpireandmoregenericdrugsareavailable.

Fig5:GenericacceptabilityintheUS

Expectgenericdemandto

growby2530%overthe

next5years


[email protected]


8/20

(Source : BP Wealth Institutional Research)

Page8

Cost Benefitanalysisof GenericDrugs:

Differentiation:AGenericDrugisacopythatisthesameasabrandname

drug indosage,safety,strength,how it istaken,quality,performanceand

intendeduse.

Differentiation Focus: In manufacturing generic drugs, the same active

ingredients (APIs) are used and are shown towork the sameway in the

body. Italsohasthesamerisksandbenefitsastheirbrandnamecounter

parts.Also,genericdrugshavethesamequality,strength,purityandstabil

ityasbrandnamedrugs.ItisseenthatGenericDrugsworkinthesameway

andinthesameamountoftimeasbrandeddrugs.

Cost Leadership: Both branded and generic drugs are manufactured by

conforming to International standards. Generics are as good as branded

drugsandsoviewedbythethirdpartyadministratorsliketheUSFDA.Thus

ifgeneric

drugs

are

bought

by

the

patient,

the

patient

save

money

as

well

gain similar benefits of branded drugs. Generic drugs offer significant

savingstoconsumers.Thecostofgenericdrugsaverages40to60%below

thecostoftheinnovatororbrandnamedrug.

CostFocus:Thegenericdrugsare lessexpensiveascompared tobranded

drugs.Whenpatentsof theoriginaldrugarenearingexpiration,manufac

turersusuallyapproach theGovernment/Drug ControlDepartment to sell

generic versions. In the process, the consumers get genetic drugs at

substantiallylowercosts.

Fig6:Competitiveadvantageofgenericdrugs


[email protected]


9/20

(Source : Bloomberg, BP Institutional Research)

Page9

Fig 7:YearwisedrugpatentexpiryintheUSA


[email protected]


10/20

Page10

COMPANIES


[email protected]


11/20

(Source : Bloomberg consensus estimate, BP Institutional Research)

SUNPHARMACEUTICALSLtd.(SUNPIN) BUY

InvestmentRational

Strongdomesticbusinessmodel:WeareverypleasedwithSunPharmas

domesticbusiness

model,

which

comprises

of

mainly

high

margin,

high

growththerapeuticareassuchascardiovascularmedicine(CVS),diabetes,

neuropsychiatry (CNS) and gastroenterology. SunPharma effectively

addressesabout3540%of thedomesticpharmamarketwithamarket

shareof~4%withhighlevelofbrandrecognition.

Caracooperationstonormalize:SunPharmasufferedamajorsetbackin

June2009,whenCaracostoppedproductionduetoUSFDAaction,leading

tolossof1516%ofSunsregularsales.Webelievethattheoperationsin

Caraco likely tobenormalizedon theaccountof thevarious corrective

measurestakenwhichincludereducingworkforcetoexploringpossibility

ofshifting

manufacturing

of

key

components

to

different

locations

and

establishing a proper process control system at its facilities in Detroit,

Michigan.While the companyhasnotprovidedany timeline forCaraco

revival,weestimateproductionat these facilities is likely to resumeby

H2FY11E.Havingsaidso,takingrevenuesbacktohistoriclevelsmaytake

anadditionalyearforSUN&Caraco,asthelostmarketsharewillhaveto

bewonovertime.

EffexorXRupside likely in thenear term:EffexorXR (patentexpires in

Q2FY11) is in our view themost promising opportunity for SUN. After

more

than

a

year

of

delay

(due

to

Osmoticas

citizen

petition),

the

US

FDA

rejectedthepetitionclearingthewayforapprovalofSunsproduct.Inour

view,ifapproved,EffexorXRcouldadduptoRs2.8andRs4.5toourFY10

andFY11EPSestimatesrespectively.Wehowever,expecttheopportunity

tobelimitedintime,asTevaislikelytolaunchanABratedgenericinJuly

2010.

Valuation:WevalueSunpharmaat25xFY11Eearningswithatargetprice

ofRs1900.Ourearnings calculation takes in toaccount the~US$34bn

patent expiry opportunity in the US between 201015 and potential

launchofgenerics versionofblockbusterdrugs likeArimidex,Arecept,

Protonix,Plavix,

Zometa,

Cymbalta

and

Glivec.

CMP: Rs1640

Target:

Rs1900

BSEcode: 500387

NSESymbol: SUNPHARMA

Bloomberg: SUNPIN

Reuters: SHCM.BO

KeyData

Sensex: 17170

52weekH/L 1770/970

O/s

Shares

(mn)

:

208

MarketCap(RsBn): 350

ShareHolding

Pattern

(%)

FY09 FY10E FY11E

P/E 20.6 26.4 22.5

Price/Sales 8.7 8.5 7.5

Price/Book 5.2 4.3 3.7

Price/CashFlow 20.5 25.0 21.7

DividendYield 0.74 0.7 0.9

EV/EBITDA 20.3 26 23

Valuationsummary


Averagevolume

3mnts 184614

6mnts 238980

1year 326701

ResearchAnalyst

SouvikChatterjee

Tel:+912261596410

[email protected]

BPEquitiesresearchavailableonBloomberg BPEP


12/20


Page12

Rs.Mn. FY08 FY09 FY10E FY11E

Sales 28283 39085 40303 45817

EBITDA

11404

17971

13262

15738

EBIT 11043 17825 12431 14634

PreTaxProfit 11837 19149 13979 16774

NetIncome 10663 16544 12787 15163

EPSAdjusted 53.0 79.7 62.1 72.9

CashFlowPerShare 53.7 80.1 66.2 76.4

DividendsPerShare 9.0 12.2 12.4 14.1

BookValuePerShare 208.4 315.1 387.0 446.8

10

15

20

25

30

35

40

45

10

20

30

4050

60

70

80

90

100

FY05 FY06 FY07 FY08 FY09 FY10E FY11E

EPS(Rs) RoE(%)

Financialoverview

EPSandRoEgraph


[email protected]


13/20

Dr.REDDYSLABORATORY(DRRDIN) BUY

InvestmentRational

Strong pipeline and limited competition products to provide growth

opportunities:DRL

has

built

up

astrong

pipeline

of

62

ANDA

pending

for

USFDAapprovalofwhich35Para IVproducts including13ofFTFstatus.

The companyhas strong visibilityofutilizing theseopportunities to the

fullest going forward. Fondaperinux (US$200mn with no competition),

AllegraD24(US$180mn)andLotrelarelikelytobematerializedinnext6

12monthswithlimitedcompetition.

LaunchofOmeprazole;potentialupside:DRLhas launchedOmeprazole

(US$500mn)OTC inDecember09 andweexpect results to showup in

the coming quarters. We estimate Omeprazole OTC to contribute

Rs5000mn

in

the

DRLs

topline

over

the

next

2years.

Betapharmatoremainunderpressure:ThemajorworryforDRLisyetto

getover.Betapharmas(DRLsGermansubsidiary)performancecontinued

to remain under pressuremarked by amarginal growth of 2% due to

lowerpricingofAOKtender(90%oftotalBetapharmasales)anddrop in

market share for thenonAOKproducts.Going forward,we expect this

businesstocomedownfurther(degrowthof25% inFY10).Ontheback

ofGermanmarketshiftingtomoretenderbasedbusiness,DRLtooknon

cashhitofRs8.6bnonintangibleassetsandgoodwill.Withwritedownof

Rs8.6bn,thecarryforwardvalueof intangibleonaccountofBetapharma

isEuro93mn.

Management

has

indicated

that

there

may

not

be

further

impairmentonBetapharmaaccount. Inorder toprotect theprofitability

ofBetapharma,companyisfurtherrealigningitsheadcountinGermany.

Valuation:WevalueDr.Reddys lab at21xFY11EearningsofRs64.We

havefactored intheUS$72bnpatentexpiryopportunity intheUSwith

the possible launch of the generic version of some of the blockbuster

drugslikeCozzar(US$3.5bn),Arimidex(US$1.8bn),Actos(US$3.6bn),

Prograf(US$1.7bn)andZyprexa(US$4.7bn).WeexpectDRLsearnings

to increase by 45% by FY11E on the back of the 32% expected rise in

FY10E.

CMP: Rs2079

Target:

Rs1340

BSEcode: 500124

NSESymbol: DRREDDY

Bloomberg: DRRDIN

Reuters: REDY.BO

KeyData

Sensex: 17170

52weekH/L 1257/378

O/sShares(mn): 168

MarketCap(Rs.Bn) 198

ShareHolding

Pattern

(%)

FY09 FY10E FY11E

P/E 35.4 26.8 18.4


Price/Book 3.84 4.54 3.7

Price/CashFlow 33.0 15.8 14.5

DividendYield 0.41 0.52 0.63

EV/EBITDA 19.3 15.6 12.7

Valuationsummary

(Source : Bloomberg consensus estimate, BP Institutional Research)


ResearchAnalyst

SouvikChatterjee

Tel:+912261596410

[email protected]

Averagevolume

3mnts 503461

6mnts 616383

1year 536471

BP

Equities

research

available

on

Bloomberg

BPEP


14/20

Page14


Sales 50006 69441 71564 81142

EBITDA 8248 16226 15646 16526

EBIT 5040 12412 10520 13262

PreTaxProfit 2862 4019 2246 13611

ExceptionalItems 3101 14992 9162 0

NetIncome 4642 5303 7052 10799

EPSAdjusted

22.7

45

52

64

15

10

5

0

5

10

15

20

25

40.0

20.0

0.0

20.0

40.0

60.0

80.0

FY08 FY09 FY10E FY11E

EPS(Rs) RoE(%)

Financialoverview

EPSandRoEgraph



[email protected]


15/20


RANBAXY(RBXYIN) BUY

CMP: Rs460

Target:

Rs552

BSEcode: 500359

NSESymbol: RANBAXY

Bloomberg: RBXYIN

Reuters: RANBBO

KeyData

Sensex: 17170

52weekH/L 538/133

O/s

Shares

(Cr)

:

420

MarketCap(RsBn) 194

InvestmentRationale

Veltrex exclusivity to provide growth: The timely launch of Valtrex

(valacyclovir)intheUSmarketwith180daysexclusivityandgrowthinthe

lasttwoquartersindicatethatRanbaxysworstismoreorlessover.With

the approval for Valtrex coming through on time, Ranbaxys ability to

successfullychangesitesandgetapprovalsintimeforitsotherFTFoppor

tunitieshaveincreasedsignificantly,reinforcingourpositivestanceonthe

stock.

Domestic business to add Viraat strength: Ranbaxy has rolled out

projectViraattostrengthenitsleadershippositioninIndia.Thecompany

is extremelypositiveon theoutcome of the project andhope that the

benefitswould

be

visible

in

the

financials

by

Q2CY10.

The

company

is

aim

ing forsignificantlyacceleratedgrowth in Indiapost the implementation

ofthisinitiative.DomesticmarketrevenuesinQ4CY10grewby6%YoYto

~US$70m. OTC sales grew by 27%yoy on back of robust growth seen

acrossthebrandsincludingthehealthsupplementcapsuleRevital.

Flomax rejection a negative blow: The rejection of Ranbaxys generic

Flomaxby theUSFDA representsa lossofopportunity forRanbaxy.The

lossofFTFadvantage is likely to impactRanbaxysability togainmarket

shareaswellasmaximizegainsduringthelimitedexclusivityperiod.

Valuation:WevalueRanbaxystockat23xCY10EEV/EBITDAarrivingata

target price of Rs 552, recommending Buy.We believe that Ranbaxys

basebusinesslikelytogrowby12%CAGRoverthenext23yearskeeping

into consideration the the unabsorbed overheads at Paonta Sahib &

Dewasaswellasthehigh legal&consultancychargesbeing incurredto

wards resolving theFDA issuesat theseplants.The stabilityon the cur

rencyfront(USD/INR)willalsohelpRanbaxysbottomlinegrowth.

CY09 CY10E CY11E

P/E

na

32.2

20.9

Price/Sales 25.8 23.4 20.6

Price/Book 3.9 3.4

Price/CashFlow 21.7 18.5

EV/EBITDA 29.6 18.6 13.8

Valuationsummary


ResearchAnalyst

SouvikChatterjee

Tel:+912261596410

[email protected]

ShareHoldingPattern(%)

Averagevolume

3mnts 2171052

6mnts 2258567

1year 2711357

BP

Equities

research

available

on

Bloomberg

BPEP


16/20

Page16

Rs.Mn. CY08 CY09 CY10E CY11E

Sales 72414 73924 81555 92725

EBITDA 5749 7124 11319 15289

PreTaxProfit 15000 10065 9430 13244

ExceptionalItems[FxLoss/(Gain)] 3424 10856 4235 0

NetIncome 2965 9512 6244 9662

EPSAdjusted 4.6 24.85 14.1 21.7


[email protected]


17/20

(Source : Company, BP Institutional Research)

LUPIN(LPCIN) BUY

CMP: Rs1583

Target:

Rs1970

BSEcode: 500257

NSESymbol: LUPIN

Bloomberg: LPCIN

Reuters: LUPN.BO

KeyData

Sensex: 17170

52weekH/L 1624/580

O/s

Shares

(mn)

:

90

MarketCap(RsBn) 141

InvestmentRational:

Robustbusinessmodel:LupinisoneofourtoppicksintheIndiangeneric

pharmaceuticalspaceowingto itsrobustanddiversifiedbusinessmodel.

Its foray into high growth contraceptive segment alongwith a striking

pipeline of Para IV drugs is likely to drive Lupins growthmaking it an

attractive investmentproposition.StrongUSbusiness (32%of revenues)

coupledwith steadydomesticbrandedbusiness (30%of revenues),high

growth Japanesebusiness (12%of revenues),andagloballycompetitive

APIbusiness(20%ofrevenues)arethekeypillarsofLupinsrevenuebase.

New chemicalentity (NCE)model, revamped recently,providesbroader

dimensionstoLupinsbusinessmodelalongwith itsstrongIPRcapability

inourviewandwilltakeLupintothenextlevel.

Japanto

provide

huge

opportunity:

We

believe

that

Japan

will

be

the

nextbigopportunityaftertheUSforthegenericdrugplayers.Japanwith

annualsalesofoverUS$65bn isthesecondbiggestpharmaceuticalmar

ketintheworldandhavethelargestpercentageofagingpopulation.Lu

pin,withitsacquisitionofKyowaiswellpositionedtograbtheearlyentry

advantageintheJapanesemarket.

Contraceptivestobethenextgrowthdriver:Thelaunchofhighgrowth

highmarginoralcontraceptives(OC)intheUS,inourviewwillbethenext

growthdriverforLupininthemediumtermtimehorizon.Lupincurrently

hasaportfolioofmorethan20OCs intheUSandtargetstodoublethe

OCportfoliobyFY11E,thisinourviewwillprovideabig leap intermsof

LupinsgrowthintheUS.OCmarketintheUSisworthmorethanUS$3bn

dominatedmainly by Teva andWatson.We expectUS$ 135140mn of

revenuefromLupinsOCsegmentfrom2012Eonwards.

Valuation:We recommendBuyon Lupinwitha targetpriceofRs1970

valuingitat21xFY11Eearnings.Webelievethatwithamarketableoppor

tunity(patentexpiry)ofUS$53bninthenextfiveyearsintheUScoupled

withstrongpresenceinotherkeymarkets,Lupiniswellsettomovetothe

nextorbitmakingitanattractiveinvestmentproposition.

FY09 FY10E FY11E

P/E 27.92961 21.6 16.8


Price/Book 6.5 4.9

Price/CashFlow 18.4 14.8

EV/EBITDA 21.1 16.7 13.2

Valuationsummary


ResearchAnalyst

SouvikChatterjee

Tel:+912261596410

[email protected]

ShareHolding

Pattern

(%)

Averagevolume

3mnts 244949

6mnts 262633

1year 233316

BP

Equities

research

available

on

Bloomberg

BPEP


18/20


Page18


Sales

27064

37761

46685

55788

EBITDA 6361 7284 9176 11623

PreTaxProfit 5402 6027 8193 10309

MinorityInterest 1.3 28.6 0 0

NetIncome 4082 5015 6493 8358

EPSAdjusted 45.6 56.0 72.5 93.4

5

10

15

2025

30

35

40

45

5

15

25

35

4555

65

75

85

95

105

FY05 FY06 FY07 FY08 FY09 FY10E FY11E

EPS(Rs) RoE(%)

Financialoverview

EPSandRoEgraph


[email protected]


19/20

Page19

Notes


[email protected]


20/20

Research Desk Tel: +91 22 61596464

Disclaimer Appendix

General DisclaimerThis report has been prepared by the research department of BP WEALTH Pvt. Ltd. and BP EQUITIES Pvt. Ltd, is for

information purposes only. This report is not construed as an offer to sell or the solicitation of an offer to buy or sell any

security in any jurisdiction where such an offer or solicitation would be illegal.

BP WEALTH Pvt. Ltd. and BP EQUITIES Pvt. Ltd have exercised due diligence in checking the correctness and authenticity of

the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy

or completeness. The opinions expressed are our current opinions as of the date appearing in the material and may be

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