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Lupin reported earnings above our estimates across all metrics. Revenue at INR 55,143 mn increased by 16.3% YoY and 12.6% QoQ, driven by strong performance in North America, Growth, and Emerging markets. EBITDA at INR 12,409 mn showed robust growth of 44.9% YoY and 24.5% QoQ, with a margin of 22.5%, expanding 445bps YoY and 214bps QoQ. The improvement in EBITDA margin was driven by strong commercial execution of new product launches, solid performance of existing products, and lower than anticipated R&D spending. Adj. PAT at INR 8,013 mn saw a significant improvement of 77.8% YoY and 44.8% QoQ, with an APAT margin of 14.5%. Future growth performance will be driven by upcoming new product launches in the US, especially in the complex portfolio, outperforming the Indian market by 20-30%, and higher operating margins.

* India Business: The India business reported revenues of INR 19,259 mn, up 17.5% YoY and 20.3% QoQ, constituting c.37% of total formulation sales. It outperformed the IPM growth by 180bps. Core therapeutic areas, including Cardiology, Respiratory, GI, and VMS, grew faster than the market. The management expects that the India business will continue its growth trajectory, with a 20-30% expansion above the market growth rate, driven by a strategic focus on key therapy areas and potential inorganic expansion.

* North America Business: North America generated revenues of INR 20,408 mn, showing robust growth of 28.3% YoY and 7.4% QoQ, constituting c.40% of the total formulation sales. This growth was driven by new launches, offset by single-digit price erosion in base products and additional generic competition in certain key products. The company has a strong pipeline of over 40 injectables and more than 20 inhalations. Price erosion remains in the single digits and is expected to continue in this range. gSpiriva will continue to contribute significantly and is expected to maintain its market share of 30-35% in the US market in FY25. The company has also successfully launched gMyrbetriq® (25mg) with coexclusivity. Management is confident in maintaining revenues for the region at over USD 200 million in the coming quarters and anticipates achieving over USD 250 million in FY26.

* Margin Performance: The Gross Margin for the quarter stood at 68.8%, showcasing a robust expansion of 293 bps YoY and 57 bps QoQ. This improvement was driven by multiple factors, including a better product mix, lower sales of in-licensed products, increased volumes, and cost improvements and efficiencies. The EBITDA margin, at 22.2%, demonstrated a notable enhancement of 437 bps YoY and 206 bps QoQ. Management expects to sustain the gross margin at the current level, deliver a +20% EBITDA margin in FY25, and further improve going forward.

* Outlook and Valuation: We expect future growth for Lupin to be driven by a shift to complex generics, India business growing 20-30% above the market growth, the ramp-up of Tiotropium, and the launch of new products in the US and India markets. The projected CAGR for FY23-26E stands at 15.1% for Revenue, 44.5% for EBITDA, and 97.0% for PAT (low base). We value the stock based on an FY26E EPS of INR 72.2, arriving at a target price of INR 2,237 (valued at 31x), and maintain a BUY rating on the stock.

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