The stock fell 6.49 per cent to hit a low of Rs 982 on BSE on Thursday. With this, the scrip has fallen 15 per cent from its August 6 high of Rs 1,155.
said Lupin’s performance was below expectations due to a dip in US sales and lower gross margin. It said US sales would remain under pressure and multiple ongoing USFDA issues would weigh on new approvals.
“The near-term outlook remains uncertain and we expect Ebitda margin to remain below 20 per cent despite the focus on cost control initiatives,” the brokerage said, while retaining a ‘reduce’ rating on the stock with a revised price target of Rs 962, down from Rs 1,135 earlier.
Kotak Institutional Equities reduced its price target to Rs 1,220 from Rs 1,320 earlier, as it felt the June quarter performance was a setback after a period of sustained margin improvement in FY21.
The drugmaker reported a five-fold jump in consolidated net profit at Rs 542.46 crore compared with Rs 106.90 crore profit reported for the year-ago quarter. Consolidated revenue from operations rose to Rs 4,237.39 crore from Rs 3,468.63 crore for the same period a year ago.
Gross margin came in at 60.8 per cent, down 270 basis points sequentially while the adjusted margin was down 520 basis points QoQ at 14.2 per cent.
“Lupin’s optical beat in June quarter was driven by a one-time income but its core operating performance remained weaker than expected. Adjusting for the one-time milestone income of $50 million received from Boehringer Ingelheim, revenue was down 7 per cent and Ebitda 33 per cent compared with our estimates. Adjusted Ebitda margin (ex-milestone income) stood at 14.2 per cent against our estimate of 19.8 per cent,”
said.
The brokerage said US revenue at $172 million was a meaningful miss and was impacted by incremental competition in Famotidine, slower Albuterol ramp-up and pricing pressures in other key products. It suggested a target of Rs 990 on the stock.
Among different geographies, domestic growth at 27 per cent YoY was ahead of Street estimates, aided by Covid-related tailwinds and faster-than-market growth in the chronic portfolio. In the North American region, Lupin reported revenue of $172 million, up 10 per cent YoY but down 12 per cent sequentially.
Analysts said continuous healthy growth in India and gradual ramp-up in US sales would help revenue growth and margins improvement but USFDA OIA (official action indicated) on four plants could deter growth in the near term.
Motilal Oswal Securities said the prevailing valuations adequately factor in potential niche launches over the next 12–15 months. This brokerage has lowered its earnings estimate by 22 per cent for FY22 and 14 per cent for FY23, factoring in increased competition in g-Famotidine and pricing pressure in the base business; the failure to supply products due to supply disruption on account of Covid; the deferral of sales of certain products, and reduced operating leverage. It sees Lupin at Rs 1,040.
Edelweiss has cut its FY22 and FY23 earnings estimates by 10 per cent each on near-term US uncertainties. While Lupin trades at 21 times FY23 EPS, some of the opportunities such as Suprep bowel and gRevlimidare are not sustainable, it said.
Nomura India sees the stock at Rs 1,399, and Edelweiss at Rs 1,090 (from Rs 1,160).
