Strong US, India sales help Lupin put up a stellar show

Q3 performance beats consensus estimates on all counts; analysts expect strong show to continue

Strong US and India sales coupled with a recovery in its Japanese business helped Lupin post better-than-expected performance. For the quarter ending December 2013, revenues at Rs 2,983 crore (up 21 per cent, year-on-year) were ahead of consensus estimates of Rs 2,867 crore. Earnings before interest, taxes, depreciation and amortisation (Ebitda) at Rs 806 crore came way ahead of estimates of Rs 692 crore and net profit at Rs 476 crore (up 42 per cent) again beat estimates of Rs 437 crore.

Although the Street was expecting a subdued US growth, it actually grew 12 per cent in dollar terms (31 per cent in rupee terms) as both existing and the five new generic launches provided the boost. The major generic launches for Trizivir, Trilipix, Cymbalta and Zymaxid in December are likely to drive Lupin’s March 2013 quarter numbers, too.

The launch of cholesterol lowering drug, Niaspan, too, is expected in March 2014. Given the spell of cold that has intensified leading to higher flue cases in the US in the current quarter, anti-bacterial brand Suprax is also expected to support sales. Lupin, which has launched around 21 products till now including five-to-six oral contraceptives, is likely to maintain this run-rate moving forward, too.

Domestic sales, which declined by a per cent in June 2013 quarter and was up just nine per cent in the September 2013 quarter, affected by the implementation of new drug policy and related trade issues, grew 14 per cent in the December quarter. The domestic sales (12 per cent of revenues) are likely to grow at a faster rate in March 2014 quarter before touching 18-20 per cent growth rate by the June quarter of FY15, believes Nilesh Gupta, managing director of Lupin.

Japanese revenues grew just two per cent in rupee terms (10 per cent in Yen); but it is better than 12 per cent and six per cent decline during the first two quarters of FY14. Lupin’s acquisition of Nanomi B.V. of the Netherlands, though a small-ticket one, marks its foray into the technology-intensive complex injectibles space, and takes it a step forward in term of rolling out products going ahead.

Most analysts remain bullish on Lupin, which gained 4.54 per cent on Monday to close at Rs 922. While Arvind Bothra at Religare says Lupin is among his top pick in pharma space and reiterates a target price of Rs 1,115, Ranjit Kapadia at Centrum Broking has a target price of Rs 1,200. The consensus target price stands at Rs 1,020.