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Lupin Ltd. recently announced its performance for the quarter ended December 31, 2020. Following are the key highlights.

Highlights from the Quarter (Q3 FY21)

During Q3 FY21, the top-line grew by 6.6% YoY at Rs.4,017 cr and up by 4.8% as compared to Rs.3,835 cr on qoq basis. U.S. sales grew by 4% sequentially at US$188 million in Q3 FY21, as compared to US$180 million in Q2 FY21, and grew by 1% as compared to Q3 FY20. The sequential growth was driven by ramp up in Albuterol as well as new products like Lapatinib, Tacrolimus etc. India region saw a growth of 5.4% YoY, since demand for acute as well as chronic products picked up as the market began to open up, leading to higher patient visits to the clinics.

Gross margins were up by 1.4% vis-a-vis the previous quarter at 64.9%, driven by improvement in the business mix across regions and continued moderation of freight rates. There is further scope of improvement in Gross margins on account of alternate vendor development and rationalization of employees. Employee cost came in at Rs.707cr as against Rs.685cr, on account of increments rolled out during the quarter. EBITDA margin came in at 19% in the current quarter and the company aims to achieve margin at 20-22% in near future.

Going forward, company expects India to report double digit growth in FY22 vs single digit growth in FY21 with increase in market share. On US, it plans to file 30- 35 products on yearly basis. About 15-20 will be oral solids, FTF, few derma, few opthals, rest will 6+ injectables, 3-4 on inhalation as compared to 6 products in 9MFY21.

Outlook and Valuation

Lupin has strong pipeline of products with limited competition, which are planned to be launched in US and Europe. Company believes, with investment that it has made in women healthcare and speciality products, it is at inflection point and should drive healthy topline growth. We expect ROE to improve from 2.7% in FY20 to 12.9% FY22e. We recommend HOLD on the stock with target price of Rs.1,117 for the period of 18-24 months .

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