Much like in earlier quarters, Lupin Ltd’s US business has played a key role in its performance. Overall sales rose by 37.4% while revenues from the US market rose by 68%. This market contributes to about 40% of Lupin’s sales now. It launched five new products in the market in the quarter, with generic anti-cholesterol Tricor drug likely to have been a significant contributor.
Other markets, too, played a supporting role, except for a few. In India, sales rose by only 14%, lower than the 18% growth in the September quarter, and the company attributed this to an industry-wide slowdown. India is a key market for Lupin, and contributes to more than 20% of revenues.
Since Europe is a small market, at just 2% of sales, a 7% decline in that market did not affect Lupin much. In contrast, Japan is a big market where the company did well, with total sales rising by 43% in local currency terms, and by 16% if one excludes the impact of acquisitions.
Lupin’s sales grew ahead of input costs and other operating items, which led to its operating profit margin rising by 3.6 percentage points over the year-ago period and by 1.8 percentage points sequentially. Just as in the September quarter, the company’s effective tax rate was significantly higher.
Lupin’s profit before tax rose by 78.6%, but its net profit after minority interests rose by 42.6%. The company attributed this to a timing effect, as it pays tax on sales made to its US subsidiary, but till the US subsidiary sells its inventory, the profit does not reflect on the consolidated financials.
Once the revenues kick in, the tax rate will trend lower, and the company expects it to be about 35% of profits, from 38% at present.
Lupin does face the threat of generic competition for its own cholesterol-lowering drug Antara in the US market. The result of ongoing litigation will determine if it does. But sales from its other key products such as generic Tricor and a growing base of oral contraceptives should give it a buffer. Moreover, the company’s management said, in a conference call, that it continues to look out for more brand acquisitions. Any success on that front could boost revenues too. In the near term, investors will look for sales growth in India to recover.
Lupin’s share rose by 0.87% on Thursday, after its results were announced. It trades at about 19 times estimated 2013-14 earnings per share (EPS), according to consensus estimates polled by Thomson Reuters. That more or less captures the 20% growth in EPS analysts are factoring in.