Lupin Q3 Results: Profit Rises On Tax Reversal, Margin Contracts

Lupin Ltd.'s third-quarter profit rose, beating estimates, on a deferred tax reversal.

The drugmaker reported a net profit of Rs 545.5 crore in the October-December period, up 24% year-on-year, according to its exchange filing. That compares with the Rs 310.3-crore consensus estimate of analysts tracked by Bloomberg.

Pre-tax profit, however, was 68% down year-on-year on a 15% increase in expenses, including a rise in raw material, finished goods and other expenses.

High other expenses were due to one-time costs from return of drugs worth Rs 193 crore. This refers to residual Metformin (type 2 diabetes) returns from retail and consumers not identified previously, and a provision for aged stock returns of Oseltamivir given lack of an active flu season for the past two years, the company said in the filing.

Key Highlights (YoY)

• Revenue rose 4% to Rs 4,160.9 crore, against the Rs 4,180.1-crore forecast.

• Net operating profit stood at Rs 370.8 crore, down 54%, against the Rs 644.7-crore forecast.

• Margin contracted to 8.9% from 20.1%. Analysts had projected it at 15.4%.

According to Nilesh Gupta, managing director at Lupin, the inflationary environment has impacted margin. "But we remain focused on margin and Ebitda improvement as we deliver on key product launches, cost optimization and improving efficiencies, especially by H2 FY23."

Ramesh Swaminathan, executive director and global chief financial officer and head corporate affairs, told BloombergQuint that "10-12% growth in top line is expected for FY23 and further improvement is expected FY24 onwards on the back of new product launches and clearance of OAIs (official action initiated) on existing plants". But no clear timelines on the U.S. FDA inspections are known, he said.

Other Highlights (YoY)

• India sales rose 8% to Rs 1,473 crore, contributing 36% to total sales.

• U.S. business grew 9% to Rs 1,578 crore, forming 39% of total revenue.

• Lupin's Europe, Middle-East and Africa sales saw a 5% rise, contributing 8% of the total revenue.

• Bulk drugs business fell 25%, making up 6% of the total revenue.

• Growth markets (Latin America and APAC) saw a 2% rise, while the rest of the world sales fell 6%.

• Research and development expenses stood at 8.7% of sales this quarter.

• Net debt-equity as on Dec. 31 stood at 0.18.

Lupin launched two new products in the U.S. and one brand in the respiratory segment and two brands in the cardiac segment in India this quarter.

It continues to be the third-largest pharmaceutical company in the U.S. generic market and the U.S. total market by prescriptions, according to IQVIA MAT November 2021. It is the sixth largest in the Indian pharmaceutical market, according to IQVIA MAT December 2021.