Lupin Q2 PAT up 9%, shares dip

Operating income contributed significantly to net profit in the quarter

Drug maker Lupin’s net profit for the quarter ended September rose 9% year-on-year to Rs 290 crore, mostly in line with street expectations. The earnings of the company are mainly driven by robust sales in three of its key markets – the US, Japan and India.

Besides, the company’s other operating income also contributed significantly to the rise in its net profit for the quarter.

“We have had a record first half, driven by strong operating performance and sustained growth across all our business segments,” Lupin Managing Director Kamal K. Sharma said.

The net sales of the company during the quarter increased by a whopping 29% to Rs 2239 crore. Lupin’s revenue in Japan grew most by 85% to Rs 330 crore, as against Rs 178 crore in the corresponding period year ago. Japan contributes 15% to the company’s consolidated revenue.

Sales in the US rose to Rs 781 crore from Rs 648 crore, a growth of 20%. Lupin, the fifth largest generic player in the US, has earned 35% of revenue from the US market during the second quarter.

According to Vinita Gupta, Chief Executive Lupin Pharmaceutical Inc, the company’s revenues in the US market is driven by its aggressive product launches. During last six months, Lupin launched around three pharmaceutical products in the world’s largest drug market, Gupta said. Going forward, the company aims to launch 17 more generic drugs in the US by the end of the current financial year.

“We have a pretty aggressive product pipeline for the near future. We have a pipeline of 19 first-to-file for the US over next three to four years,” Gupta told Business Standard post the company’s announcement of September quarter results.

First-to-file would mean the company would get exclusive marketing rights for those products in the US for 180 days. The drug maker expects to launch a total of 120 drugs in the US over next four years, Gupta said.

Lupin’s sales in the domestic market increased 18% on year to Rs 606 crore during Jul-Sep. The company is the third largest by sales in India.

During the quarter, the other operating income of the company grew by 107.5% as compared to the corresponding period year ago. According to Gupta, the rise in other operating income is mainly due to export benefits and detailing income from its arrangement with Forest Labs.

The company’s operating margin increased by 28% on year to Rs 516crore for the quarter ended September.

“Lupin reported above expected results. The operating margin expansion came mainly on back of reduced R&D expense during the period, which declined from Rs138 crore in second quarter FY2012 to Rs 94 crore in second quarter FY2013. This along with the higher tax along with the deprecations during the quarter aided the net profit to come at Rs290 crore, in comparison to the Rs 270 crore estimated for the quarter. We maintain a buy on the stock with a target of 647,” Sarabjit Kour Nangra, Vice Preseident-Research, Angel Broking said.

Lupin is also looking at acquisition of companies to expand its product portfolio in the US and Latin America, Gupta said.

“We will be comfortable making a big acquisition in markets like US where we already have a presence. However, we are also looking at product acquisitions, product partnerships or even buying out companies in new and emerging markets,” she said.

The company currently has a debt-equity ratio of 0.27:1.

“We have a comfortable cash position. However, we may look at raising some money once we finalise our acquisition plans,” Gupta said.

On BSE, shares of Lupin went down by 1.25% to close at Rs 562.7 per share on Tuesday.