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Lupin share price falls over 11% in two session after Q1 results; brokerages cut target

Lupin share price falls over 11% in two session after Q1 results; brokerages cut target

Lupin share price falls over 11% in two session after Q1 results; brokerages cut target
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By CNBCTV18.com Aug 12, 2021 1:28:52 PM IST (Updated)

Lupin share price fell over five percent after the company's US sales declined sharper than expected, while brokerages now see a recovery in US sales only from Q3FY22.

Lupin shares extended their losses on Thursday, falling another five percent after the company’s first-quarter earnings missed street estimates.

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The stock price fell over six percent on August 11 after the company reported its Q1FY22 earnings. The stock is down almost 14 percent in the last four trading sessions.
The company’s consolidated net profit in Q1FY22 rose to Rs 542.46 crore from Rs 106.9 crore, while revenue increased 21 percent to Rs 4,270.19 crore from Rs 3,527.6 crore, YoY.
However, Lupin’s North America sales for Q1FY22 were Rs 13,330 million, down 10.8 percent compared to Rs 14,952 million, QoQ. The US sales account for 35 percent of Lupin’s global sales.
North America sales declined mainly due to incremental competition in key drug Famotidine, weaker gAlbuterol sales and a failure to supply penalties.
Global brokerage CLSA said that Lupin’s Q1FY22 results were below its estimates and a bigger miss if adjusted for the ‘one-time’ $50 million in licensing income. The decline in US sales was sharper than expected and the brokerage firm sees a recovery in US sales and its Ebitda margin only from Q3FY22.
“While Lupin is taking many initiatives for longer-term growth which should lead to an earnings rebound after three tough years, its execution track record has been patchy with 45%-70% EPS cuts over past four years,” CLSA said.
CLSA cut its FY22-24CL EPS 3%-11%. It maintained a Sell rating on the stock and reduced the target price to Rs 970 per share from Rs 1,080 earlier.
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Lupin’s Q1FY22 performance was below expectations due to a dip in US sales and lower gross margin, said domestic brokerage ICICI Securities. It believes US sales would remain under pressure and multiple ongoing USFDA issues would weigh on new approvals.
“The near term outlook remains uncertain and we expect EBITDA margin to remain below 20 percent despite the focus on cost control initiatives. We believe near term outlook remains weak and resolution of USFDA issues would be critical,” ICICI Securities said.
The brokerage maintained 'reduce' rating on the stock and cut the target price to Rs 962 per share from Rs 1,135 earlier.
Motilal Oswal lowered its earnings estimate by 22 percent/14 percent for FY22E/FY23E, factoring in increased competition in g-Famotidine and pricing pressure in the base business, the failure to supply products due to supply disruption on account of COVID, the deferral of sales of certain products, and reduced operating leverage
The brokerage maintains a 'neutral' call as it sees a limited upside from current levels. It cut the target price to Rs 1,040.
Meanwhile, Lupin’s India formulation sales for the quarter rose 27.2 percent to Rs 1,636.2 crore from Rs 1,286.6 crore, QoQ, and 27.3 percent, YoY
Analysts at domestic brokerage Sharekhan believe Lupin’s domestic formulations business has a strong growth outlook and is expected to stage growth in the high teens for FY2022 backed by a chronic-heavy presence and growth in the overall business.
The US business on the other hand is witnessing price erosion, which is expected to lead to a subdued Q2. Given pricing pressures in the US, Lupin has lowered its EBITDA guidance for FY22 to around 17 percent from 19-20 percent levels earlier.
“Lupin’s Q1FY22 operating results marginally missed estimates and so we have tweaked our earnings estimates for FY22E/FY23E. Given the robust growth outlook and the long term growth levers intact, and improving return ratios, we retain 'buy' on Lupin with an unchanged PT of Rs 1,400,” Sharekhan said.
At 10:15 am, the shares of Lupin were trading 5.68 percent lower at Rs 990.55 apiece on the BSE.
(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)
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