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Strong Results Led by New Launches

Est. vs. Actual for Q1FY26: Revenue – INLINE; EBITDA Margin – BEAT; PAT – BEAT

Changes in Estimates (%) post Q1FY26

FY26E/FY27E: Revenue: 0.3%/1.2%; EBITDA Abs 0.7%/2.0%; PAT: 0%.6/0.8%

Recommendation Rationale

• A strong set of results: Lupin reported a robust performance for Q1FY26, with revenue of Rs 6,268 Cr, up 12% YoY and 10.6% QoQ, broadly in line with estimates. Growth was led by strong execution in the US business (+24.3% YoY, Rs 2,404 Cr / $282 Mn) and steady momentum in the India business (+7.8% YoY). The EMEA region also witnessed healthy growth, while Other Developed Markets grew moderately. However, the API segment saw a YoY decline, impacted by pricing pressure.

• Improvement in gross margin: Gross margin expanded by 288 bps YoY to 71.7%, aided by a better product mix (including Tolvaptan and Myrbetriq), lower share of in-licensed products, and improved cost efficiencies.

• EBITDA & Profitability: EBITDA stood at Rs 1,727 Cr, up 39% YoY and 31% QoQ, with EBITDA margin improving by 540 bps YoY to 27.6%, driven by strong operating leverage. Reported PAT grew 52% YoY to Rs 1,221 Cr, significantly beating expectations.

Sector Outlook: Positive

Company Outlook & Guidance: Lupin is poised for sustained double-digit revenue growth in FY26, led by strong US market execution, new launches like Glucagon and Liraglutide, and a robust injectable and biosimilar pipeline. While some loss of exclusivity in FY27 (e.g., Tolvaptan, Mirabegron) may create near-term volatility, management projects high single-digit to potential double-digit growth, supported by new approvals including Risperdal, Pegfilgrastim, and Ranibizumab. EBITDA margins are expected to remain healthy at 24–25% in FY26, with further expansion in FY27 driven by premium product mix and continued cost optimization. R&D spending will stay elevated (7.5–8.5% of sales) as focus shifts toward complex generics, 505(b)(2) products, and global biosimilar expansion. Adjacency businesses are currently dragging margins by ~1% but are expected to break even by FY27, adding further upside to profitability.

Current Valuation: 27x PE for FY27 earnings (Earlier 29x/FY27E)

Current TP: Rs 2,400/share (Earlier TP: Rs 2,500/share)

Recommendation: BUY

Financial Performance

Lupin reported a strong set of results that exceeded expectations. Reported revenue grew 12% YoY, led by US businesses, which grew 24% YoY (largely driven by Tolvaptan and Myrbetriq), along with a 7.8% YoY increase in the Indian business. The EMEA and Other Developed Markets segment grew 27% and 17% YoY respectively, while the API segment declined 33% YoY.

Gross margin expanded by 288 bps YoY to 71.7%, aided by a better product mix (including Tolvaptan and Myrbetriq), lower share of in-licensed products, and improved cost efficiencies. EBITDA stood at Rs 1,727 Cr, up 39% YoY and 31% QoQ, with EBITDA margin improving by 540 bps YoY to 27.6%, driven by strong operating leverage. Reported PAT grew 52% YoY to Rs 1,221 Cr, significantly beating expectations. The company remains debt-free and cash surplus, backed by strong cash flows. Lupin continues to sell the product under litigation, supported by non-infringement and invalidity defenses.US sales stood at $282 Mn, registering a 24.2% YoY growth in constant currency terms, the highest since Q4FY17, while overall reported revenue from the US was Rs 2,516 Cr, up 23% YoY. This growth was primarily driven by new launches and 180-day exclusivity of Tolvaptan. However, lower seasonal business and competition in Suprep and Albuterol weighed on performance. Despite this, the company maintained a 19% market share in Albuterol. India Business: Lupin reported Rs 2,089 Cr in Q1FY26, reflecting a modest 7.8% YoY growth, driven by strong performance in chronic therapies such as diabetes, cardiology, and gastroenterology, in line with market growth. The company has launched 5 Products in the Quarter in India and Planning of 20+ Products For FY26.

Valuation & Recommendation:

Lupin's strong pipeline in generics, biosimilars, and specialty drugs could drive double-digit growth in the U.S. market. Additionally, the company is continuously gaining market share in the diabetes and cardiac segments in India, supported by a 10,000-strong medical representative team that is outpacing industry growth. We recommend a BUY rating with a target price of Rs 2,500/share.

Outlook

Lupin remains confident in its growth trajectory, supported by strong new launches, an expanding complex generics portfolio, and a solid pipeline. In the US market, recently launched Tolvaptan (market size: $287 Mn), Glucagen, and Xyway are expected to contribute to meaningful revenue in FY26, and the upcoming launch of Liraglutide in Oct ’25 reflects strong execution. Additionally, injectable products like Dalbavancin, a $500 Mn market opportunity, are expected to be launched within the next six months. Lupin continues to build a robust pipeline with products such as Cyanocobalamin, Diazepam Gel, Varenicline, Bromfenac, and Risperidone. The India business is expected to maintain double-digit growth, driven by a 10,000-strong MR team and ongoing new product introductions. The API segment is witnessing a revival in demand, further strengthening Lupin’s revenue base. With strong execution, continued R&D investments, and a well-diversified product portfolio, Lupin is wellpositioned for sustainable long-term growth and profitability across its key markets.

Key Risks to Our Estimates and TP

• USFDA inspection and issuing of WL/OAI or 483 observations may impact the revenue growth

• Entry of new players may increase pricing pressure in the injectables portfolio

• Delay in launching Biosimilars in the market

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