Lupin extends gain, hits 52-wk high post Q4 results; surges 20% in 1 month

Analysts believe the stock is factoring margin recovery and certain niche launches in the US.

Shares of Lupin hit a 52-week high of Rs 796.55, up 3 per cent on the BSE in Monday’s intra-day trade, extending its gain post January-March quarter (Q4FY23) results. The stock of pharmaceutical company surpassed its previous high of Rs 788.90, touched on December 23, 2022.

In past one month, Lupin has seen its market price surge 20 per cent, as compared to 4 per cent gain in the S&P BSE Sensex.
Last week, Lupin posted a 12 per cent year on year (YoY) rise in sales for Q4FY23, and a profit after tax of Rs 242.4 crore as against a loss of Rs 511.9 crore in the corresponding quarter last fiscal.

The revenue growth came from a strong API business performance along with US and domestic market sales growth. In Q4FY22 Lupin had posted a loss due to rising costs, price erosion in the US and impairment expense of Rs 126.7 crore for US-based Gavis.

The results beat street estimates as analysts had mostly expected the company to post a 7-8 per cent rise in revenues riding on the US business (bowel drug) and sequential improvement in the domestic market.

Lupin delivered a better-than-expected Q4FY23 performance, led by healthy sales growth across segments and some benefits from the PLI scheme. The potential approval for g-Spiriva is further delayed by a few months due to certain information requests from the USFDA.

However, currently Lupin was trading well above brokerages target price set post Q4 earnings.

Profitability has been improving for the past three quarters. However, even after factoring in potential business prospects from a niche launch like gSpiriva, the return ratio would be just 10 per cent. Moreover, the current valuation more than adequately prices in the upside in earnings over FY23-25, Motilal Oswal Financial Services said in result update. The brokerage firm has ‘Sell’ rating on the stock with a target price of Rs 640 per share.

Analysts at ICICI Securities maintain HOLD rating due to sensitivity of margin recovery on few US launches, ongoing cost rationalisation that is yet to bring sustainable cost reduction, and weak return ratios. The brokerage firm values the stock at Rs 740.

Lupin plans to strengthen the biosimilars portfolio, especially in the EU and US. Change in mix towards complex products and with expense optimisation to improve margin profile. Exploring both organic and inorganic opportunities in different therapies for domestic formulations are key triggers, the brokerage firm said.

Analysts at Prabhudas Lilladher believe Lupin’s recovery in US sales will be gradual and may hinge on timely niche launches. The key launch gSpiriva further got delayed by 3-6 months. The stock is factoring margin recovery and certain niche launches in US. The stock was trading above brokerage firm target price of Rs 730 per share.