Shares of Lupin soared 7.9 per cent to hit an eight-year high of Rs 1,749 on the BSE on Thursday, backed by heavy volumes on expectations of a robust earnings outlook. The stock has nearly doubled in value over the last year and trades at consensus valuations of 33 times its FY25 earnings estimates. It has delivered double the returns of Nifty Pharma over the past year, and its outperformance of the Nifty 50 Index is sharper at 4 times during the same period.
Analysts at Kotak Institutional Equities upgraded the stock to ‘add’ from ‘sell’ with a fair value of Rs 1,805 (Rs 1,400 earlier). “Our analysis of Lupin’s US portfolio leads us to believe that Lupin is well-poised to surprise positively on Street’s estimates in the US in FY2025/26. This is despite baking in a sharp decline in Albuterol sales over the next couple of years,” the brokerage firm said in its stock update.
“While we stay cognizant of not ascribing a high multiple to one-off earnings, we highlight Lupin has a bunch of products lined up, which will ensure that the earnings per share decline in FY27 is limited,” the brokerage firm said.
Analysts now ascribe a June 2026 price to earnings multiple of 25 times (22 times earlier), owing to better medium-term sales, as well as margin outlook (lower in-licensed mix in India to also help with Empagliflozin – medicine for Type 2 diabetes – the only drug to see a patent expiry over the medium term).
In the March 2024 quarter (Q4FY24), Lupin’s gross margins and operating profit margins improved, based on better business and product mix, particularly in the US, as well as higher efficiencies. The US business continues at a strong $200 million plus revenue, despite lower seasonal products and a reduction in products like Darunavir (protease inhibitor for HIV infections) that experienced additional competition.
The management expects to sustain US business at the $200 million plus level, going ahead with the continued ramp-up of Tiotropium (asthma) and new product launches in the financial year 2024-25 (FY25).
Antique Stock Broking is also bullish on the company’s prospects. It believes that US generic opportunities with limited competition launches and market share growth in Spiriva are likely to drive Lupin’s US generic revenue to over $1 billion by FY27.
The pharma major enjoys a leadership position in the cardiovascular, anti-diabetic, and respiratory segments while having a significant presence in the anti-infective, gastrointestinal, central nervous system, and women’s health areas. It is the third-largest pharmaceutical company in the US by prescriptions. The company invested 7.8 per cent of its revenue in research and development in FY24.
First Published: Jul 04 2024 | 10:31 PM IST
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