Lupin - U.S., India On Steady Footing; Upgrade To 'Add': HDFC Securities

HDFC Securities Institutional Equities

We upgrade Lupin Ltd. to Add from Reduce with a revised target price of Rs 2,440 (31 times Q3 FY27E, up from Rs 1,950 at 28 times Q1 FY27E). Our outlook is based on key factors:

1. traction in gSpiriva (launched in Aug-23), which we expect to remain a limited competition opportunity for the next two years;

2. steady momentum in the key respiratory franchise products (Brovana, Xopenex HFA) as well as in other key products (Levothyroxine), which should offset the impact of increased competition in Albuterol HFA;

3. continued traction in recent launches (gMyrbetriq, gNascobal, gBromday/gProlensa, gOracea);

4. improved visibility for significant launches like Tolvaptan (gJynarque);

5. other important launches across ophthalmology, injectables, and respiratory segments, supported by key plant clearances from the U.S. food and drug administration; and

6. steady growth in the India business driven by new launches, MR additions, and market share gains in chronic therapies, offsetting the impact of patent expirations for in-licensing products.

Accordingly, we have raised our EPS estimates by 1% and 10% for FY25 and FY26, respectively. Over FY19-24, Lupin delivered a 7% sales CAGR and an 8% Ebitda CAGR.

Looking ahead, we expect a sales CAGR of 9% for FY24-27E and an Ebitda margin improvement to ~22% in FY27E (from 19.0% in FY24), resulting in an Ebitda CAGR of 14% and an EPS CAGR of 21% over FY24-27E.

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