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Lupin reported revenue at INR 56,727mn increased by 12.6% YoY and 1.3% QoQ, driven by strong performance in India formulation business and 40% of US revenue coming from the complex generics. EBITDA at INR 13,083mn showed robust growth of 41.7% YoY and 1.7% QoQ, with a margin of 23.6%, expanding by 541bps YoY and 147bps QoQ. The improvement in EBITDA margin was driven by the change in the product mix and cost of raw material procurement coming down. Adj. PAT at INR 8,526mn saw a significant improvement of 74.1% YoY and 6.4% QoQ, with an APAT margin of 15% (highest in the last 6 years). Upcoming new product launches in the US, particularly in the complex generic portfolio, along with the Indian market outperforming by 20–30%, will drive future growth performance.

* India Business: The India business reported revenues of INR 20,096mn, up 18.8% YoY and 4.3% QoQ, constituting 37% of the global sales. The chronic segment shares 62% of the revenue and grew by 13.5% YoY. It outperformed the IPM growth by 290bps. Core therapeutic areas, including Diabetes, Cardiology, Respiratory, GI, and VMS, grew faster than the market. With a strategic focus on important treatment areas and possible inorganic development, the management anticipates that the Indian business will continue on its current growth trajectory, consistently outpacing the market growth, and prioritizing chronic therapy.

* North America Business: North America generated revenues of INR 19,711mn, showing growth of 5.6% YoY and de-growth of 3.4% QoQ, constituting 36% of the total global sales, the growth was volume-led. Around 40% of the revenue came from complex generics. US business margins are higher than the consolidated company margins. This growth was driven by volume in the base product portfolio but offset by additional Gx competition and high channel inventory in certain key products. The Albuterol market share was 21.6% and the Arfomoterol market share was 27.4% during the quarter. The company has a strong pipeline of over 40 injectables and more than 20 inhalations. Price erosion remains in the low-single digits and is expected to continue in this range. Management anticipates growing the US business by double-digit in FY25 and reaching USD 230mn quarterly.

* Margin Performance: The Gross Margin for the quarter stood at 70.2%, showcasing a robust expansion of 400bps YoY and 136bps QoQ. This improvement was driven by multiple factors, including a better product mix, operating efficiency, and low procurement cost. The EBITDA margin, at 23.6%, demonstrated an expansion of 541bps YoY and 147bps QoQ. Management expects to sustain the gross (68-69%) at the current level and EBITDA margin to be around 22% in FY25, and expects to further improve.

* Outlook and Valuation: We anticipate that the shift to complex generics, the expansion of the Indian business by growing 20–30% above the market, and the ramp-up of the new product launches will drive the growth but the margins will not see any significant expansion. Factoring these rationales we have projected CAGR for FY24-27E stands at 12.2% for Revenue, 18.5% for EBITDA, and 27.1% for PAT. We have introduced FY27E and valued the stock based on Sep-FY27E EPS of INR 86.2, arriving at a target price of INR 2,383 (valued at 30x), with a HOLD rating on the stock.

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