Lupin stock soars: Analysts bullish on growth but valuation may cap upside

Shares of Lupin rose 2.75 per cent at Rs 2,047.50 per share on the BSE in Thursday's intraday trade. The stock price has jumped 7.36 per cent in the last two trading sessions as the firm posted a stellar show in its quarterly earnings on Tuesday.

The Indian pharmaceutical major received praise from the brokerages for delivering strong earnings in the April-June quarter of financial year 2024-25 (Q1FY25), while having an even stronger growth outlook. 

The domestic brokerage firm, Nuvama Institutional Equities upgraded its call for Lupin’s stock to ‘Buy’ from ‘Hold’ owing to the continued outperformance lined up for the company in terms of its growth outlook. This it said was due to Lupin’s growing prospects in the US and in the domestic business. 

“We are upgrading Lupin to ‘Buy’’ as we believe its India growth outlook is very attractive. US product launches are likely to continue and we highlight Lupin is the only large-cap pharma without Revlimid in the US. With US margin now moving past the company average and range of new launches expected, Lupin can continue with earnings surprises,” Shrikant Akolkar, Aashita Jain, and Gaurav Lakhotia of Nuvama said. 

Financial run in Q1

Lupin’s topline and bottomline were 4 per cent and 19 per cent higher than the Japanese brokerage firm Nomura’s estimates, while also breaching the bloomberg consensus estimates in Q1FY25. 

According to analysts, the quarterly earnings performance was led by by steady traction in Spiriva - a drug indicated for treating COPD in adults. Further, the launch of overactive bladder treatment drug Myrbetriq also aided the Q1 beat to estimates, but this was offset by competition impact in Albuterol. 

The Mumbai-based pharma giant reported a whopping 77.2 per cent year-on-year (Y-o-Y) increase in profit after tax (PAT) for Q1FY25, reaching Rs 801 crore. This was driven by successful new product launches and robust performance in key markets. 

The company's revenue from operations also grew by 16.2 per cent Y-o-Y to Rs 5,514.3 crore. The earnings before interest, tax, depreciation and amortisation (Ebitda) also soared by 48.9 per cent Y-o-Y, reaching Rs 1,308.8 crore. The company sales in US grew by 9.5 per cent Y-o-Y, while zooming 20.3 per cent in the domestic market. 

Vital signs

According to brokerages, Lupin’s growth outlook for FY25 and FY26 looks more promising, as the company company has strong launches lined up with drugs such as Slynd, Doxil, PredForte, Liraglutide, Glucabon, Dulera, and Tolvaptan. Adding to that will be existing products such as Spiriva and Mirabegron which also have more steam left till FY26. 

Analysts said that the company’s growth outlook for India has now improved with 200–300 basis points outperformance with IPM. India drives 60 per cent of Lupin’s valuation and, hence, this is a welcome, analysts at Nuvama noted. 

Further a 22–23 per cent margin guidance in the mid-term and better growth outlook in Mexico and Philippines are also key positives for the pharmaceutical company. 

“We think upcycles across businesses will drive expansion of Ebitda margin and earnings growth. We highlighted the Tolvaptan generic opportunity in our recent note (link ) that can present upside to current estimates,” analysts at Japanese brokerage firm Nomura noted.

Valuations debatable 

Brokerages sang in unison about Lupin’s growth outlook but stayed divided on the valuation front with many calling the current trading values - a bit expensive, while some continued to stay bullish on more upside in the counter. 

Nomura has a ‘Buy’ rating on the stock with a March 2025 target price of Rs 1,952 based on 27.5 times the FY26 earning per share (EPS) of Rs 71. 

Nuvama also stayed bullish on Lupin, despite the run up of the stock in recent times, raising its target price to Rs 2,368 from Rs 1,610 earlier, implying a price to earnings of 29 times on September 2026 EPS. 

Meanwhile, global brokerage firm Jefferies retained its ‘Hold’ rating for Lupin while raising its target price to Rs 1,900.

However, not all agree on the valuation front, as those at HDFC securities have given Lupin a ‘Reduce’ call at a raised target price of Rs 1,950 per share. 

“While growth visibility led by growth in the US (Spiriva, and new launches— Myrbetriq, Jynarque), India (new launches and traction in key therapies) and improving margin (sales growth and cost optimization) are intact, this has been already rewarded with the run-up of 85 per cent in price in the last 12 months,” Mehul Sheth of HDFC Securities said in a report. 

Similarly, JM Financial, too, is bullish on Lupin growth trajectory however, high product dependency and demanding valuations compelled it to maintain its ‘Hold’ stance with a target price of Rs 1,940. 

Analysts at ICICI securities also believe that the counter is trading at expensive valuations, adding that the stock trades at a price to earnings of 28.8 times its FY26 EPS. The brokerage firm lowered its rating to ‘Sell’ from ‘Reduce’ with a target price of Rs 1,650.

At 11:42 AM; the stock price of the company was trading 2.42 per cent higher at Rs 2041 per share on the BSE. By comparsion the BSE Sensex was down by o.39 per cent at 79,159 levels