Accumulate Lupin Ltd For Target Rs.2,500 by Prabhudas Liladhar Capital Ltd
Growth to take hiatus
Lupin’s (LPC) Q1FY27 EBITDA stood at INR 24.6bn (up 50% YoY); 15% beat to our estimates on the back of healthy sales. LPC saw remarkable turnaround in profitability over last 3 years with ~5x jump in EBITDA over FY23-26 aided by better product mix, continued niche launches in the US, clearance from USFDA for facilities, domestic formulations regaining momentum and cost optimization measures. Currently 3 products (gTolvaptan, gMirabegron and gSpiriva) contribute ~50% to total EPS. These products will face competition from Q2FY27/FY28. Though Lupin has some niche pipeline including 505 (b) (2) opportunity and biosimilars to compensate we expect Lupin PAT to decline over FY26-28E. Our FY27E and FY28E EPS stands cut by 6% led by higher depreciation charges. We maintain our “Accumulate” rating with TP of INR 2,500 (25x FY28E EPS).
Revenue growth aided by RoW markets:
Revenues grew 33% YoY to INR 82bn, vs our estimate INR 78bn. Beat was on account of higher RoW sales. US revenues stood at USD 363mn, down 2% QoQ, we estimated USD 370mn. Performance was largely aided by contribution from gTolvaptan and other new launches. India formulation grew by 14% YoY. EMs increased sharply by 48%, whereas other developed markets increased by 52% YoY. API business was up 8.5% YoY.
EBITDA beat estimates:
The company reported EBIDTA of INR 24.6bn; up 50% YoY. OPM up 80bps QoQ at 29.8%, beat to our estimates. Increased contribution from gTolvapton and better product mix supported margins. GM’s continue to remain strong at 74.6%, flat QoQ. R&D expenses increased by 25% YoY; 7.4% of sales at INR 6bn. Ex R&D other expenses were up 35% YoY. The company booked forex loss of INR 139mn. Other operating income came in lower at INR 597mn. Tax rate at 22%. Adjusted for forex PAT came in at Rs14.2bn; up 16% YoY.
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