Top Conviction Ideas : Buy Lupin Ltd for Target Rs. 2,400 - Axis Securities Ltd
* Lupin reported strong results, exceeding 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 defences
* North America Business: 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 the 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
* Outlook: 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 optimisation. 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.
For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home
SEBI Registration number is INZ000161633
