Lupin : 2Q – In Line and Solid : Citi

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Lupin (LUPN.BO)
Alert: 2Q – In Line and Solid


Lupin’s 2Q results were largely in line, with strong trends in most key businesses
leading to healthy margin expansion & bottom-line growth. We see management
commentary on key markets (India, US, Japan) & future pipeline in the US as key
to how valuations move from here. Lupin remains our top large cap pick.
 Inline 2Q — Lupin’s 2Q results held no surprises, with good traction in most
businesses. Strong growth in higher margin markets / products along with
reasonable control on fixed overheads and interest cost led to healthy bottom-line
growth.

 Good Growth in Most Markets — Topline (+26%) was driven primarily by strong
growth in India (+18%) & developed markets (+40%) formulations. Japan
recovered from the blip in 1Q to post 22% YoY growth. Lupin’s press release does
not break out US & EU sales – cumulatively, formulations sales in these markets
grew 46%. API sales remained flat YoY, as Lupin uses its capacity incrementally
for captive consumption. The only disappointment appears to be the tepid (10%)
growth in the US branded biz – Antara appears to be struggling to gain traction.

 Healthy Margins — EBIDTA margins improved 238bps YoY, primarily on better
sales mix (Lotrel & Antara in US, higher share of formulations) & despite the ramp
up in US branded field force earlier in the year. With interest costs coming down,
this translated into 34% YoY growth in net profit.