Lupin shares: Brokerage sees 23% upside potential, anticipates high growth with new US launches

Nuvama Institutional Equities said Lupin Ltd has reported financial results that exceed market expectations, with revenue, EBITDA and PAT surpassing its estimates by 2 per cent, 6 per cent, and 17 per cent, respectively. The company's margins were also higher than anticipated, being 90 basis points (bps) above projections. However, the brokerage noted that an increase in R&D expenditure, coupled with a reduction in PLI incentive, has constrained further expansion of the company's EBITDA margins.

Lupin has guided for a quarterly base revenue of $250 million from its US operations, bolstered by the upcoming launches of generic versions of gJynarque and gXarelto. The pharmaceutical company has earmarked gMyrbetriq and gSpiriva as key products for FY26E, indicating their continued significance in the market. Nuvama mentioned that the growth trajectory for FY26E appears strong, driven by the robust launch pipeline in the United States.

Despite an uptick in R&D investments, the domestic brokerage expects Lupin to sustain EBITDA margins exceeding 24 per cent over the next two years. The company's strategic focus is on enhancing the contribution of complex products to its portfolio, reflecting its commitment to innovation and market leadership. Management has also expressed confidence that potential US tariffs will unlikely impact the company's generics segment adversely.

Nuvama said the pharmaceutical giant's stock recommendation remains at 'Buy' with a target price of Rs 2,530. The stock was last seen trading 0.74 per cent lower at Rs 2,056 on Friday. Considering this, it indicated a potential uptick of 23.05 per cent over the suggested target price of Rs 2,530.

"Lupin will be placing greater focus on growing complex and specialty products in the US, aiming to take its complex generics share from 31 per cent in FY25 to 49 per cent by FY30E and doubling specialty share from 3 per cent to 6 per cent over the same period," it highlighted.

"The US growth is likely to be led by new launches in complex generics, with a target of 100-plus new product launches by FY30. 60-plus filings are planned by FY30 with an addressable market of around $19 billion and more than 30 Para IV filings have been planned too. M&As and partnerships will be a focus as well to grow the specialty portfolio," Nuvama further stated.