Lupin needs non-US markets to step up in FY15

 

Lupin Ltd’s headline numbers are quite comforting. Sales in the March quarter rose by 20.2% from a year ago to Rs.3,051.6 crore. Profitability sparkled as well, with operating profit margin rising by 2.6 percentage points from the same period last year and 2.5 percentage points sequentially. 

 

That should have been reason for investors to celebrate, but the drug maker’s share declined by 1.2% on Wednesday and even fell by 2.8% from its day’s high levels.

 

 

Lupin’s India business was one weak spot, as sales rose by a mere 1.8%, pulling down growth since it contributes to a fifth of formulation sales. Ramesh Swaminathan, president, finance and planning, attributed this partly to low growth to a high base effect. 

 

In the March 2013 quarter, a shortage in earlier quarters ended and sales rose by 43%. Even then, the Street was expecting a better growth figure than what was achieved. The company’s managing director said in an interview to CNBC TV18 that the company has a plan to improve growth in FY15. Some help should be at hand from a low base effect, as India’s sales in FY14 grew by just 5%.

 

 

The star performer for Lupin continues to be its US formulations business, which contributes to 53% of formulation sales and which grew by 28.2%. The company has benefited from its existing base of formulation sales and from new launches, of which some drugs have limited competition and, therefore, earn better revenue and margins.

 

 But branded drugs, which now account for 10% of US sales, are still not showing an increase in their contribution. This is another niggling factor—one that the company has promised to tackle through acquisitions and technology tie-ups.

 

 

Among other markets, Japan looks better but the company expects that a year more may pass before its I’rom Pharmaceutical Co. Ltd acquisition can deliver its full potential.

 

 South Africa and Rest of the World markets are relatively smaller contributors but are growing at healthy rates.

 

 

Among other markets, Japan looks better but the company expects that a year more may pass before its I’rom Pharmaceutical Co. Ltd acquisition can deliver its full potential. 

 

South Africa and Rest of the World markets are relatively smaller contributors but are growing at healthy rates.

 

 

Lupin’s earnings per share for FY14 came in at Rs.40.8, translating to a price-to-earnings multiple of 24.3 times. That is not a difficult valuation to hold on to, if it can ensure that all its business units deliver in FY15.

 

 Rahul kumar Gupta,

PGDM,1st Year

Source:-MInt