Lupin Q3 Results Review - Growth Pace To Slow Down Going Forward: Systematix

Systematix Research Report

Lupin Ltd. Q3 FY24 revenue were inline but earnings were above our expectations led primarily by a lower effective tax rate. Ebitda margins, which have ramped up post launch of gSpiriva in the U.S., should remain at current levels in the near term as we expect the favorable impact of new launches and ongoing ramp up in gSpiriva market share to be offset by erosion in large assets like gSuprep.

In gSpiriva, the ramp up has surprised on the upside as market share in a short span has reached 30%. The company expects the ramp up to continue and reach 40% plus.

We tweak our forecasts on Lupin and roll over our price target to FY26E. We assign a 23 times multiple to FY26E earnings per share to arrive at a price target of Rs 1,171.

We revise our rating to 'Sell' from 'Hold' at current market price. At current market price stock trades at 32 times FY26E EPS. We expect growth rates to taper going forward, as a very large part of the margin expansion that was supposed to play out on account of revival of U.S. business is reflected in the current quarter’s performance.

Going forward, Lupin is expecting multiple new launches, but the benefit form same should be offset by erosion in large assets like gSuprep.

We also expect risk to Albuterol inhaler sales through incremental competition and the recent launch of Airsupra by AstraZeneca which directly competes in the Albuterol inhaler space.

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