Lupin ends the year on a strong note

Diabetics products boost US growth; India, Japan, others add to Street beating performance

After the initial disappointments with pharma results, Lupin pepped up the Street’s sentiment with a stellar March quarter performance. Contribution from anti-diabetic Glumetza generics launched on exclusivity and price hikes taken for anti-diabetic Fortamet generics boosted US sales, taking the geography’s share in overall revenues to 53 per cent. With the US business growing 59 per cent over a year, overall numbers were comprehensively ahead of the Street’s estimates.

Revenues at Rs 4,091 crore (up 34 per cent over a year and 22 per cent sequentially) beat the consensus Bloomberg estimates of Rs 3,802 crore, whereas Ebitda (earnings before interest, taxes, depreciation and amortisation) at Rs 1,393 crore, too, was significantly higher than the estimate of Rs 1,035 crore.

Net profit at Rs 807 crore was way higher than the Rs 687-crore estimate. The stock, as a result, ended 1.4 per cent higher at Rs 1,655.80 on a day when the Sensex was down 1.2 per cent.

The growth in the US business was well supported by Japan and India operations. Japan’s sales, which contributed eight per cent to overall revenues and grew 17 per cent over a year, were helped by the 12 per cent appreciation in Japanese currency. India sales (19 per cent of the revenues) also grew 15 per cent.

Though Lupin posted an upbeat performance for the March quarter, the stock didn’t gain much because of concerns on US growth. Though it has received 39 approvals for launches in FY16, uncertainty on fresh approvals continues, with its Goa plant under scanner. Sentiments could, however, get a leg up if Lupin could manage site transfers of key products, filing for which have already begun.

Positively, the integration of Gavis (a firm Lupin has acquired) will add to the US growth.  In the interim, price hikes undertaken by Lupin in Fortamet generics will continue providing cushion.

Nilesh Gupta, managing director, Lupin, says launch run rate in the US remains strong (nine products launched in Q4), as he expects another 25 product addition in FY17 to drive growth with the existing products seeing just a single digit price erosion. FY16 had seen double digit price erosion due to distributor led issues.

With field force expansions and new product launches, Lupin’s India growth is also likely to remain robust. The key downside risk, albeit for the industry, is if more products come under drug pricing.

Given Lupin’s prospects, most analysts remain positive. Consensus target price according to analysts polled on Bloomberg in the past month stands at Rs 1,857.