300% rise in net profit in Q3; Analysts see exciting times ahead for this mid-cap firm

Analysts on Dalal Street see more steam in Lupin despite the pharmaceutical firm rallying nearly 140% in the one year till February 20. The mid-cap firm impressed brokerages with better-than-expected financial results for the quarter ended December 31. The company on February 7 reported a 300% growth in consolidated net profit at Rs 613.12 crore in Q3FY24 against Rs 153.47 crore in the same quarter last year. Meanwhile, the company also delivered all-time high sales in Q3FY24 and surpassed 20% EBITDA margins for the first time after several quarters.

Lupin’s consolidated total revenue increased 20% YoY to Rs 5,197.41 crore during the quarter under review. Shares of the company traded 0.70% higher at Rs 1,600 in the afternoon trade on February 21.

Meanwhile, the net debt-to-equity of Lupin came at 0.07 times at the end of December 2023 against 0.27 times on December 31, 2022. EBITDA also increased by 98.10% YoY to Rs 1022 crore in Q3FY24. Brokerage KR Choksey has an ‘Accumulate’ rating on Lupin with a target price of Rs 1,777, indicating an upside of over 10% against the current market price.

“Lupin has been seeing marked improvement in its operating profitability over the last 4 quarters due to improved product mix and operating leverage driven by key product launches in the US, India and EMEA and growth in the base business. The company’s expected double-digit growth in the US in FY25 rides on it being able to launch litigated OSD products which can otherwise be in single digits indicating slower growth likely in FY25 while it remains hopeful of continued such double-digit growth in the US market in FY26, owing to key product launches such as Tolvaptan. The stock is trading at 37x, 35.3x and 31.9x on its FY24, FY25 and FY26 earnings, respectively. We apply a PE multiple of 35x on FY26 EPS of Rs 50.8 and arrive at a revised target price of Rs 1,777 per share,” KR Choksey said.

The company’s US business delivered a second consecutive quarter of $200 plus million in revenue and a sixth quarter of EBITDA improvement. Lupin in its earnings call further added that its India business recorded strong double-digit growth this quarter with a 1.6 times IPM (Indian Pharmaceutical Market) growth rate. Most of our therapeutic areas like respiratory, GI and gynaecology have outperformed IPM during the quarter.

“We have launched around 21 products in the year so far and per IQVIA, we are ranked number one in new product launches in India. We have a strong chronic focus, with more than 60% of our sales contribution from chronic therapies. We are in a very good position now to deliver above-market growth consistently going ahead led by higher productivity from our sales force expansion, new divisions, and enhanced penetration and reach,” Lupin said.

Axis Securities is also bullish on Lupin with a target price of Rs 1,770. The brokerage is confident in Lupin’s business, buoyed by new launches in the US market like Darunavir and Spiriva and recent approvals for Tolvaptan (market size $287 million) and Xyway (market size $958 million with 180 days exclusivity, which could add business in the second half). A strong pipeline of products including Cynocobalamin, Diazepam Gel, Vereniciline, Bromfenac, Glucagen, Risperidone, double-digit growth in the India business, as the company has already increased MR (Medical Representative) numbers to 1,000 and an uptick in the API (Active Pharmaceutical Ingredient) business, as the API industry is witnessing a demand revival also looks positive to Axis Securities which sees significant scope for margin improvement for Lupin in the upcoming quarters.

“This improvement will also be supported by the macro environment, which is currently favourable for the industry, such as falling raw material prices, low logistic costs, and fuel costs,” Axis Securities said in a report.

 

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