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Dolat Capital Report
Though Lupin Ltd.’s pipeline in the medium term boasts of complex therapies like inhalation and biosimilars such as Brovana (FY22), Dulera, Spiriva, Pegfilgrastim launch in FY23E, and an injectable portfolio beyond FY23, trading at 25.4 times FY22 earning per share of Rs 34.6, we believe the stock is fully valuing the U.S. pipeline of near term launches and cost improvement driving higher margins (build in 355 basis points margin improvement over FY20-22E).
Slower ramp up in Solosec, higher expectation from Albuterol (though pricing environment is stable, traction could be gradual, we built in $65 million in FY21), risks to earnings remain high.
Further, cost optimisation benefits (we believe restructuring in the U.S. was related to Solosec sales force reduction) will be key for the company to achieve Ebitda margin expectation of 20% over the next two years.
Regulatory news flow on Goa, Indore and Somerset (all ready for inspection) will act as key triggers. Though the management remains confident of its complex generic portfolio for the next few years, we believe the opportunities are back ended in nature.
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