Tuesday, November 27, 2012

Investor's Eye: Update - Lupin (Lupin to get a boost from Tricor), Insurance (APEs continue to decline, though private insurers fare better)

 
Investor's Eye
[November 27, 2012] 
Summary of Contents

 

STOCK UPDATE

 

Lupin
Recommendation: Buy
Price target: Rs660
Current market price: Rs574

Lupin to get a boost from Tricor

Key points 

  • Lupin launches Tricor earlier than anticipated: Lupin launched a generic version of Tricor (fenofibrate tablets), an anti-cholesterol drug, in the US market much before anticipated. We anticipated this product to be launched in Q4FY2013. As per IMS Health June, 2012 data, Tricor tablets in the strengths of 48-mg and 145-mg had sales of $1.26 billion in the US market. Lupin is expected to garner a sizable market share in the fenofibrate market due to Tricor being a limited competition product. We expect Tricor to generate approximately $20 million in FY2013 and $75 million in FY2014. 

  • Limited competition; Abbott would continue to dominate: Tricor is a limited competition product and is presently being marketed by only three players in the US market, namely Lupin, Teva Pharmaceutical industries (Teva) and Abbott Laboratories (Abbott). We expect one more player, Valeant Pharmaceuticals International (Valeant), to join the fray in due course. However, Abbott is likely to maintain its dominant presence in the fenofibrate market by virtue of having other substitutable products in different strengths. 

  • Tricor may hurt Antara partially; yet Lupin would be the net gainer: Lupin is already marketing fenofibrate in different strengths under the brand name of Antara. Antara brand consists of the fenofibrate capsule in 130-mg and 43-mg strengths having efficacy similar to Tricor. We believe the launch of Tricor may partially hurt Lupin's Anatara brand due to its substitutability with Tricor. However, given the sheer size of Tricor and being a limited competition product, we believe Lupin would be the net gainer. 

  • We maintain our Buy rating on the stock with a price target of Rs660: Although the launch of Tricor came earlier than anticipated, which is expected to generate approximately $20 million additional revenues in FY2013, we prefer to keep our earnings estimate intact for FY2014 (already factored revenue from Tricor in FY2014). Therefore, we maintain our price target at Rs660 (20x FY2014E earnings). We have Buy rating on the stock.


SECTOR UPDATE

Insurance

APEs continue to decline, though private insurers fare better

Key points 

  • The growth in the annual premium equivalent (APE) of the life insurance industry during October 2012 continued to decline for the fourth consecutive month as it declined by 9.5% year on year (YoY). This was mainly contributed by the fall in premium collections by the Life Insurance Corporation of India (LIC), which showed a decline of 17.1% YoY. On the other hand, the private players reported a growth of 3.9% YoY in October with Birla Sun Life (up 100.3%) and SBI Life (up 44% YoY) showing a strong growth. Tata AIA, MetLife and Aviva posted a sharp decline on a year-on-year (Y-o-Y) basis.

  • On a year-to-date (YTD) basis (April-October 2012), the private players fared better than the LIC as they grew by mere 0.2% YoY as compared with a 11.7% Y-o-Y decline by LIC and a 7.7% Y-o-Y decline by the industry. The growth (April-October) in the private industry was mainly led by players like ICICI Prudential Life ( 14.7%) and Bajaj Allianz (10.8%). 

  • On a month-on-month (M-o-M) basis, the APE numbers for the private players and LIC showed a decline of 8.2%, aggregating to a similar decline for the industry. Moreover, on an M-o-M basis, 18 out of the 22 players posted a decline in their APEs, with Max Life and Bajaj Allianz posting a decline of 39.8% and 16.8% respectively.

  • The market share of the private players improved by ~280 basis points to 35.8% (LIC, 64.2%) in April-October 2012 compared with 32.9% in the corresponding period of the previous year. During the period under review, the companies like TATA AIA (2.3% vs 4.2%) and Max Life Insurance (7.3% vs 7.8%) showed a decline in the market shares. Moreover, ICICI Prudential turned out to be a major gainer as its market share improved by ~250 basis points to 19.9%.

  • So far, the private players posted a positive growth in their APEs while the LIC continued to report a decline. Going ahead, the government plans to take several measures to boost the insurance sector, which include faster approval of products, tax breaks, easing investment norms, easier know your customer (KYC) norms etc. Therefore, a growth in the APE is likely to improve in the second half of FY2013. 


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Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

 

 


       

       

Regards,
The Sharekhan Research Team
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