Q3FY23 Review: Lupin: Six-month rolling forward targets

13 Feb 2023 , 12:48 PM

Lupin’s anticipated revival in the business and profitability levels seems to get deferred by 6 months every quarter, as the key Spiriva launch is now expected in Q2FY24 (provided the plant needs USFDA inspection) vs end-FY23 earlier, while double-digit growth recovery in India on the back of recent rep expansion is now expected to play out only from Q2FY24 onwards vs H2FY23 earlier. With minimal progress on cost optimization efforts and recent 15% field force expansion in India, Lupin’s margins will continue to remain weak over the next two quarters till complex US generic launches kick in.

Lupin’s US sales increased QoQ from USD159m to USD177m in Q3, led by USD20m contribution from new products (Suprep, Pennsaid, Perforomist, Xopenex, Brovana) and single-digit revenue contribution from flu season. We believe upcoming new launches of Darunavir (Q1FY24, USD35m), Nascobalv (H1FY24, USD12-15m) and Diazepam will only partly aid current Ebitda margins of 12%, given margin improvement is largely dependent on Spiriva.

Analysts of IIFL Capital Services remain concerned that focused efforts to drive cost optimization and sustainable margin improvement seem lacking, with the mgmt largely banking on a single-product opportunity (Spiriva) to expand margins. 

Analysts of IIFL Capital Services downgrade FY23/24/25 EPS by 24/7/5% and maintain their REDUCE rating with target price of Rs 660 given single-product stories are inherently volatile, particularly considering Lupin’s recent underperformance in the domestic market and lack of visible traction on cost saving efforts.