Dolat Capital: Lupin’s Execution Critical To Drive Operating Leverage
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Dolat Capital Report
FY20 was a redemption for Lupin Ltd. as its U.S. business revenues reported growth (albeit marginal 3% YoY) post a declining phase in FY18 and FY19.
However, losses in its U.S. subsidiaries have increased 3 times at Rs 27 billion versus Rs 9 billion loss in FY19. This we believe is due to branded specialty portfolio (largely Solosec). Profitability of the standalone business halved to Rs 7.3 billion, even adjusting for the exceptional items, profits are lower by 20% YoY.
Lupin utilized its deferred tax asset to offset losses, but has not created any new ones thus elevating the tax rate. Selling, general and administrative expense (SG&A) and employee expenses rose 10% and 20% respectively, whereas research and development investment dipped 2% YoY.
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