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Work-in-progress to further build product pipeline in key markets

-      Lupin (LPC) delivered in-line operational performance in 4QFY24. LPC ended FY24 on a strong note, with INR198b in sales (up 19% YoY), EBITDA margin of 18% (up 750bp YoY) and PAT of INR19b (vs. INR4b YoY). LPC continues to implement efforts toward building a complex product pipeline in inhalation, injectables and ophthalmics.

-      We raise our earnings estimates by 6% each for FY25/FY26, factoring in a) limited competition product launches in the US generics segment, b) industry outperformance in the domestic formulation (DF) segment and c) a scale-up in the diagnostic business. We value LPC at 25x 12M forward earnings to arrive at a TP of INR1,550.

-      LPC remains in good stead to deliver a 19% earnings CAGR over FY24-26 on the back of an 11% sales CAGR in the US generics/DF segments and 160bp margin expansion. However, we maintain our Neutral rating on the stock as the valuation at 32x FY25E EPS of INR51 and 27x FY26E EPS of INR59 adequately factors in the upside.  

Product mix benefits partly offset by higher R&D spending

-      4QFY24 revenue grew 12% YoY to INR49.6b. (our est. INR52b). US sales rose 22.6% YoY to INR19b (up 19.4% YoY in CC to USD209m; 39% of sales). DF sales grew 8.3% YoY to INR16b (33% of sales). ROW sales grew 8.1% YoY to INR938m (2% of sales). EMEA sales rose 17.3% YoY to INR5.3b (11% of sales). Growth market sales grew 16.1% YoY to INR5.1b (10% of sales). API sales declined 20% YoY to INR2.6b (5% of sales).

-      Gross margin expanded 780bp YoY to 68.3% due to a better product mix.

-      EBITDA margin expanded 650bp YoY to 20.1%, largely due to better GM. A decrease in other expenses (-110bp YoY as a % of sales) was offset by higher employee costs/R&D expenses (+70bp/+170bp YoY as a % of sales).

-      As a result, EBITDA grew 65% YoY to INR10b (in line with estimates).

-      Adjusting for the impairment of intangible and tangible assets of INR2b, adj. PAT jumped ~95% YoY to INR5.0b (our est. INR5.4b).

-      In FY24, revenue grew 19% YoY to INR198b, EBITDA almost doubled YoY to INR36b, and PAT surged 4.8x to INR18.9b.

Highlights from the management commentary

-      LPC guides for 10% YoY growth in overall sales with 20% EBITDA margin in FY25. There can be further upside, subject to the outcome of litigation related to mirabegron.

-      It aspires to reach the USD1b revenue mark in US generics by FY26.

-      LPC expects to grow close to double digits YoY in the DF segment in FY25.

-      The company would be filing 11-15 ANDAs in FY25.

-      Competition impact would be visible in g-Suprep from 1QFY25 onward.

-      It is working on response to CRL for g-Dulera and would submit the same in FY25.

Work-in-progress to further build product pipeline in key markets

-      Lupin (LPC) delivered in-line operational performance in 4QFY24. LPC ended FY24 on a strong note, with INR198b in sales (up 19% YoY), EBITDA margin of 18% (up 750bp YoY) and PAT of INR19b (vs. INR4b YoY). LPC continues to implement efforts toward building a complex product pipeline in inhalation, injectables and ophthalmics.

-      We raise our earnings estimates by 6% each for FY25/FY26, factoring in a) limited competition product launches in the US generics segment, b) industry outperformance in the domestic formulation (DF) segment and c) a scale-up in the diagnostic business. We value LPC at 25x 12M forward earnings to arrive at a TP of INR1,550.

-      LPC remains in good stead to deliver a 19% earnings CAGR over FY24-26 on the back of an 11% sales CAGR in the US generics/DF segments and 160bp margin expansion. However, we maintain our Neutral rating on the stock as the valuation at 32x FY25E EPS of INR51 and 27x FY26E EPS of INR59 adequately factors in the upside.  

Product mix benefits partly offset by higher R&D spending

-      4QFY24 revenue grew 12% YoY to INR49.6b. (our est. INR52b). US sales rose 22.6% YoY to INR19b (up 19.4% YoY in CC to USD209m; 39% of sales). DF sales grew 8.3% YoY to INR16b (33% of sales). ROW sales grew 8.1% YoY to INR938m (2% of sales). EMEA sales rose 17.3% YoY to INR5.3b (11% of sales). Growth market sales grew 16.1% YoY to INR5.1b (10% of sales). API sales declined 20% YoY to INR2.6b (5% of sales).

-      Gross margin expanded 780bp YoY to 68.3% due to a better product mix.

-      EBITDA margin expanded 650bp YoY to 20.1%, largely due to better GM. A decrease in other expenses (-110bp YoY as a % of sales) was offset by higher employee costs/R&D expenses (+70bp/+170bp YoY as a % of sales).

-      As a result, EBITDA grew 65% YoY to INR10b (in line with estimates).

-      Adjusting for the impairment of intangible and tangible assets of INR2b, adj. PAT jumped ~95% YoY to INR5.0b (our est. INR5.4b).

-      In FY24, revenue grew 19% YoY to INR198b, EBITDA almost doubled YoY to INR36b, and PAT surged 4.8x to INR18.9b.

Highlights from the management commentary

-      LPC guides for 10% YoY growth in overall sales with 20% EBITDA margin in FY25. There can be further upside, subject to the outcome of litigation related to mirabegron.

-      It aspires to reach the USD1b revenue mark in US generics by FY26.

-      LPC expects to grow close to double digits YoY in the DF segment in FY25.

-      The company would be filing 11-15 ANDAs in FY25.

-      Competition impact would be visible in g-Suprep from 1QFY25 onward.

-      It is working on response to CRL for g-Dulera and would submit the same in FY25.

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