Lupin shares fell sharply for the second day, following the drugmaker's quarterly earnings annoucement on Tuesday. Lupin, India's third-largest drugmaker, posted a 55 per cent rise in its first-quarter profit at Rs 882 crore. Reported revenues were up 41 per cent to Rs 4,440 crore.
However, some analysts said that the jump in Lupin's Q1 profit was driven in part by a lower tax rate. An HDFC Securities analyst said Lupin's margins were off 2.5 per cent, due to higher employee costs.
According to Nirmal Bang Securities, Lupin's reported EBITDA of Rs 1,310 crore was below consensus estimate, while its EBITDA or operating margin at 29.5 per cent also missed estimates.
In India, which is Lupin's second-largest market, growth in sales was a lower than expected 5.2 per cent, hurt largely by the government's moves to cap drug prices.
Lupin's sales in North America, its largest market, surged 82.3 percent to Rs 2,190 crore. However, the company expects more competition for its drugs in the US market.
Brokerage CLSA said higher competition in the US and lack of visibility in the launch of key complex products will weigh on the stock. It downgraded Lupin to "sell" from "underperform" and cut its target price on the stock to Rs1,500.
Credit Suisse also maintained its "underperform" rating on the stock (target Rs 1,450) citing unfavourable risk-reward.
However, Morgan Stanley retained its "overweight" call (target Rs 1,986) saying the Street may be "overestimating" the risks.
Lupin shares closed 4 per cent lower at Rs 1,544.40, underperforming the Nifty that fell 1.2 per cent.
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