The sharp decline in Lupin Ltd’s share price since January appears to have set the stage for a smart recovery post-results. The past few quarters had seen Lupin’s results disappoint, particularly on sales growth in the US. This quarter did not. Although its numbers were close to what some analysts had expected, the fact that it met estimates and has some key product launches in the bag may be boosting confidence. The company management said it expects growth will get much better. That kind of confidence is always music to investors’ ears. While its share fell by 10.5% in January, it has bounced back 10% from then.
Lupin’s sales rose by 6.8% over a year ago to Rs.3,358 crore. That does not seem much but sequential comparison shows its US market sales rose by 21.6%, quite healthy compared with the 3% decline seen in the September quarter. The company said both branded and generics’ businesses did well, with a mix of volume growth and price increases contributing. An increase in the price of Fortamet, a diabetes drug sold in the US market by Lupin, was expected to contribute to growth.
In its home market, sales rose by 17% over a year ago, again better than the preceding quarter’s 9% growth. While Japan and South Africa saw sales increase sequentially, they declined in Europe and rest of the world markets.
Lupin’s other operating income too increased substantially, rising by 38.6% sequentially partly due to higher export incentives. Some part of this increase is sustainable, though some are one-time in nature.
The net result was that expenses grew at a slower rate than income did. Its operating profit margin increased by 4.4 percentage points sequentially to 24.7% but was still lower than the year ago quarter’s 27.8% figure. As a result, its net profit after minority interests rose by 29.6% sequentially but declined by 11.9% from a year ago.
The company recently announced the launch of generic Glumetza, an anti-diabetes drug, with a six-month exclusivity period of sales. This is one of the reasons for its management’s confident outlook over the next few quarters. With the share having regained lost ground, the rapid increase in the stock post-results may settle into a more normal routine.
The writer does not own shares in the above-mentioned companies.