Lupin’s valuations need a big growth push from US market
About 46 of Lupin’s first-to-file drug applications in the pipeline, other exclusives could aid revenue growth in the US
Shares of Lupin Ltd have been meandering on the bourses and the lukewarm second-quarter results may not fire up the stock soon. The Lupin stock, which had run up post lockdown, is down about 10% in the past month.
Unlike some of the frontline pharmaceutical companies, Lupin has not quite outpaced the Street expectations. Revenues came in lower year-on-year, but was up sequentially by 7.3%.
A good thing is that US dollar revenue picked up 17% sequentially. The management indicated that the full benefits of Albuterol would be seen in the next two quarters. Besides, its relaunch of generic Glumetza in September could also reflect in growth in the coming quarters.
In addition, Lupin’s about 46 first-to-file drug applications in the pipeline and other exclusive opportunities could aid revenue growth in the US in the second half.
Still, investors must watch the US generic pricing after the new launches.
Lupin’s domestic market growth came in marginally higher than last year. But this could perk up and be in the region of around 5-6% in the coming quarters.
Higher growth in emerging markets and the rest of the world is encouraging with sales picking up in the second quarter. The disruption in the rest of the world markets now seems to be behind.
Even so, growth has been a tad slow in its formulations segment over the year-ago period, coming in at just 1%. Besides, the active pharma ingredient segment is also showing signs of tapering off, down about 8.6% sequentially.
Lupin’s operating profit came just in line with the Street expectations, but declined about 20% year-on-year.
Note that last year’s operating profit included a one-time gain from licensing fees. But the company did not quite gain much from the sharp reduction in staff costs as other expenses were higher during the quarter. Overall, Ebitda (earnings before interest, tax, depreciation and amortization) margins stood at about 15.2% in Q2.
Nevertheless, despite the expected growth in its US pipeline, Lupin’s stock is valued at about 25 times FY22 earnings which is stiff. Its growth rates in the US markets will be key to sustain these valuations.
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