Lupin slips 9% in two days, hits 52-week low on disappointing Q3 results

Shares of Lupin dipped 6 per cent to Rs 816.25 in Monday’s intra-day trade, falling 9 per cent in the past two trading sessions after the drugmaker reported lower-than-expected margins and net profit in December quarter (Q3FY22) due to one-time expenses related to residual metformin returns and provision for aged stock returns of Oseltamivir.

The stock of the pharmaceutical company dropped below its previous 52-week low of Rs 854 touched on December 20, 2021. The stock trades at its lowest level since May 2020. In the past six months, the stock has shed nearly 30 per cent, as compared to a 7 per cent rise in the S&P BSE Sensex.

In Q3FY22, Lupin’s earnings before interest tax and depreciation and amortization (EBITDA) margins contracted by 580 bps quarter-on-quarter (QoQ) and 1,050 bps year-on-year (YoY) at 9.9 per cent. Profit before tax (PBT) more-than-halved ( down 68.2 per cent YoY) at Rs 1,671 crore. The company said that excluding one-time expenses of Rs 193 crore, Q3FY22 EBIDTA margin was 14.6 per cent and PBT was Rs 360 crore. Net sales grew 4.3 per cent YoY at Rs 4,088 crore.

Lupin delivered a lower than expected Q3FY22 financial performance, led by moderate growth in the US and India and higher price erosion and raw material cost. While the management continues its efforts towards building a complex pipeline and working on cost optimization measures, a meaningful benefit is expected from 2HFY23 onwards.

“The inflationary environment has impacted margins, but we remain focussed on margin and EBIDTA improvement as we deliver on key product launches, cost optimization and improving efficiencies, especially by H2FY23,” the management said.

Motilal Oswal Financials maintains ‘neutral’ rating on Lupin with a targe price of Rs 810 per share. The brokerage firm cut its earnings estimate on account of price erosion in the US Generics segment, increased raw material cost, lack of demand for certain products in US the Generics/API segment, gradual benefit from cost optimization measures, and multiple areas where costs are front loaded and the benefit is yet to accrue.