Investor's Eye
[January 01, 2014] | | |
| Summary of Contents
STOCK UPDATE Lupin
Recommendation: Buy
Price target: Rs1,075
Current market price: Rs917 Price target revised to Rs1,075 Key points -
Visibility improves in the US market with tentative approvals for Niaspan: Lupin Ltd (Lupin) has got the US Food and Drug Administration's (USFDA) tentative approvals of its abbreviated new drug application (ANDA) for niacin (500mg, 750mg and 1000mg extended release tablets), which is currently marketed by Abbvie (Abbott) under brand name of Niaspan. Lupin is expected to launch these products during March 2014 (after Teva Pharmaceutical's [Teva] 180-days exclusivity terminates on March 16, 2014). Niaspan generates near $1.2 billion of annual revenue and therefore provides a significant opportunity for Lupin. Apart from Lupin, players like Sun Pharmaceutical Industries Ltd (Sun Pharma) and Barr Pharmaceuticals (Barr Pharma) are also likely to join the niacin extended release market. -
Recently launched products represent significant upside: We estimate an incremental revenue of $29 million in Q3FY2014 and $92.7 million in Q4FY2014 from six key products that were launched during Q3FY2014. This is apart from the addition of products like Alinia, Locoid lotion and the new strength of Antara being added to its branded products portfolio. These products are expected to give a substantial upside to its US business in H2FY2014. Lupin generated $347 million of revenue in H1FY2014 from the US market. We expect FY2015 to be crucial for Lupin, which will see some blockbuster drugs like Nexium (market size $2.2 billion), Lunesta (market size $800 million), Namenda (market size $1.75 billion), etc getting out of the patent protection. -
Emerging market to show steady growth: Except the Japanese market, which is witnessing a weaker performance due to the restructuring at a step-down subsidiary of I'rom Pharmaceuticals, most of developing markets like India (trade related issues likely to get settled shortly), South Africa and other emerging markets are likely to see steady growth. -
We introduce our estimates for FY2016 and roll-over valuation to set the price target at Rs1,075: We introduce our estimates for FY2016 and roll-over valuation to average earnings for FY2015E and FY2016E. Accordingly, our price target is revised up by 10% to Rs1,075 (which implies 21x average earnings for FY2015E and FY2016E earnings per share [EPS] of Rs55.6). We maintain our Buy recommendation on the stock. Federal Bank
Recommendation: Buy
Price target: Rs110
Current market price: Rs86 Ahead of the pack; price target revised to Rs110 Federal Bank's liability profile continues to improve (current account, savings account [CASA] of 30.7% in Q2FY2014) owing to the bank's increased thrust on savings deposit mobilisation. Though, the deposit mobilisation under the RBI's concessional swap window (foreign currency non resident [FCNR]) was not significant (compared to the larger banks), the core NRI deposits (remittances which is mainly savings deposits) grew quite strongly. This should cushion the net interest margins (NIM) and we expect it to be sustained around the 3.2% level. While asset quality has been a concern with the bank, the slippages had declined significantly in the small and medium enterprises (SME) and retail segment. On the corporate book the management does not expect any significant surprise, though Rs300-350 crore worth of loans are still under watch. However, we derive comfort from the higher provision coverage (81.2% in Q2FY2014) and better capital ratio (tier-I capital adequacy ratio [CAR] of 14.6%) adds comfort on the asset quality. We upgrade the price target for the stock to Rs110 which is in line with its long-term average multiples of 1.2x (average of FY2015/2016 book value), as the return on equity is also estimated to revert back to 14-15% range. The bank is also better positioned than its peers to manage asset quality pressure and maintain its net interest margins at around 3.2% levels. Thus, we maintain our buy rating on the stock. Price target revised to Rs110: We upgrade the price target for the stock to Rs110, which is in line with its long-term average multiples of 1.2x (average of FY2015/2016 the book value) as the return on equity is also estimated to revert back to the 14-15% range. The bank is also better positioned to manage asset quality pressures and protect its net interest margin at around the 3.2% level. Thus, we maintain our Buy rating on the stock.
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Regards,
The Sharekhan Research Team | |
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