IGI Logo

Our view:

A slow ramp up in Albuterol due to transition to longer term contracts might provide assurance on volumes; however, any increase in supply is likely to be offset by lower prices, which may again create a steady rise in market share but not any non‐ linear payoff. Indeed, even with Albuterol, company has not had a single quarter beyond US$200mn, while in pre‐Covid times, company also managed US business around US$190‐200mn per quarter. In other words, base business has eroded significantly such that large products like Albuterol have only kept US revenues in a range.

On margin, management aims for 20% plus in FY23 with a focus on cost containment and not outright revenue‐led rise which would have been more sustainable; in this context, we note Lupin has commendably controlled costs with other expense ex‐R&D risen just 1% annually between FY17‐21 while staff costs are flat. We cut FY22 and FY23 estimates by 18% and 8% respectively primarily driven by cut in US revenue to US$780mn from US$825mn earlier – reckon if H2 US revenues do not pick up, there is still downside risk to our estimates. Inclusion of NCE income softens the cut in current fiscal. Retain SELL based on unchanged 20x FY23 EPS with a revised target of Rs940 (earlier Rs1,000).  

Result Highlights

* US revenues in line and carry impact of failure to supply penalty, slow Albuterol ramp up and increased Famotidine competition  

* India rebounds on weak base and expected to clock high teens growth  

* Margin ex‐NCE income came in weaker than expected as sales include failure to supply penalty and lower gross margin qoq

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer