Lupin stock rallies 7%, hits multi-year high on healthy earnings outlook

Shares of Lupin hit a multi-year high at Rs 1,749, soaring 7 per cent on the BSE in Thursday’s intra-day trade backed by heavy volumes on expectation of healthy earnings. The stock of drug maker surpassed its previous high of Rs 1,727.90 touched on May 22, 2024. The stock was trading at its highest level since August 2016. The stock had touched a record high of Rs 2,127 on October 6, 2015.

At 01:57 pm; Lupin was quoting 6.9 per cent higher at Rs 1,743, as compared to 0.13 per cent gain in the BSE Sensex. The average trading volumes at the counter jumped nearly 10-fold. A combined 5.5 million shares changed hands on the NSE and BSE.

 

Lupin enjoys a leadership position in the cardiovascular, anti-diabetic, and respiratory segments and has a significant presence in the anti-infective, gastro-intestinal (GI), central nervous system (CNS), and women’s health areas. Lupin is the third-largest pharmaceutical company in the US by prescriptions. The company invested 7.8 per cent of its revenue in research and development in FY24.

In the March 2024 quarter (Q4FY24), Lupin’s gross margins and operating margins improved, based on better business and product mix, in particular in the US and also higher efficiencies. The US business continues strong at $200 million plus revenues, despite lower seasonal products and reduction in products like Darunavir that experienced additional competition. The management expects to sustain US business at the $200 million plus level, going ahead with the continued ramp-up of Tiotropium and new product launches in fiscal year 2024-25 (FY25).

Analysts at Kotak Institutional Equities double upgrade Lupin to ADD from SELL with FV of Rs 1,805 (Rs 1,400 earlier).

“Our analysis of Lupin’s US portfolio leads us to believe that LPC is well-poised to surprise positively on Street’s estimates in the US in FY2025E/26E. This is despite baking in a sharp decline in Albuterol sales over the next couple of years. While we remain cognizant of not ascribing a high multiple to one-off earnings, we highlight Lupin has a bunch of products lined up, which will ensure a limited earnings dip in FY2027E after a strong FY2026E,” the brokerage firm said in its stock update.

Analysts believes there is still a possibility of further positive surprises if Lupin continues to gain share in gSpiriva as well, if there is lower-than-expected hit from Albuterol competition.

“While we stay cognizant of not ascribing a high multiple to one-off earnings, we highlight Lupin has a bunch of products lined up, which will ensure that the EPS decline in FY2027E is limited,” the brokerage firm said.

Analysts now ascribe a June 2026E PE multiple of 25X (22X earlier) owing to a better medium-term sales as well as margin outlook (lower in-licensed mix in India to also help with Empagliflozin being the only drug to see a patent expiry over the medium term).