Launching Injectable Products Like Liraglutide Will Strengthen Future Prospects

Key Takeaways

• Lupin's focus on complex injectables, respiratory products, and biosimilars is set to boost margins and diversify revenue streams.
  
• Strategic acquisitions and ANDA filings aim to enhance revenue and earnings growth through an enriched product portfolio.
  
• Increased competition and pricing pressures in key markets, along with legal and tariff risks, threaten Lupin's revenue growth and profitability.

Catalysts

Operates as a pharmaceutical company in India and internationally.

• The company plans to launch an exciting portfolio of injectable products such as glucagon, Risperdal Consta, and liraglutide, which are anticipated to contribute significantly to revenue growth in the coming fiscal year.
  
• Lupin aims to increase the complexity of its product portfolio in the U.S., shifting towards injectables, respiratory products, and biosimilars, which are generally higher margin compared to commoditized generics, potentially improving net margins.
  
• The acquisition of the Huminsulin range and trademarks for the diabetes portfolio in India is expected to enhance revenue growth in the domestic market through strengthened therapeutic offerings.
  
• With an anticipated filing of more than 30 ANDAs over the next two years, focusing on complex products, Lupin aims to drive earnings growth through a robust and diversified product pipeline.
  
• The filing and eventual launch of biosimilars, particularly in new therapeutic areas such as respiratory, could provide Lupin with new revenue streams and improve long-term profitability.

Lupin Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Lupin's revenue will grow by 9.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.0% today to 16.0% in 3 years time.
• Analysts expect earnings to reach ₹46.4 billion (and earnings per share of ₹101.96) by about March 2028, up from ₹28.7 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹32.3 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.3x on those 2028 earnings, down from 32.8x today. This future PE is greater than the current PE for the IN Pharmaceuticals industry at 28.7x.
• Analysts expect the number of shares outstanding to grow by 0.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.53%, as per the Simply Wall St company report.

Lupin Future Earnings Per Share Growth

Risks

• Potential competition in the U.S. market, particularly with expected new generic entrants for key products like albuterol and Suprep, could lead to price erosion and impact revenues.
  
• Slow growth in the respiratory therapy segment within India, despite expected peak season performance, could affect overall revenue growth and profitability in the domestic market.
  
• Anticipated low single-digit price declines in base products in the U.S. market could impact revenue growth and profitability, potentially leading to a squeeze on margins.
  
• Continued reliance on successful litigation outcomes, particularly around significant products like Mirabegron, presents risks to maintaining earnings and revenue if unfavorable outcomes occur.
  
• The potential imposition of tariffs on imported pharmaceuticals into the U.S. could significantly increase costs, affecting net margins and overall profitability if the company cannot pass these costs onto consumers.

Valuation

• The analysts have a consensus price target of ₹2300.886 for Lupin based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹2800.0, and the most bearish reporting a price target of just ₹1834.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹290.4 billion, earnings will come to ₹46.4 billion, and it would be trading on a PE ratio of 32.3x, assuming you use a discount rate of 12.5%.
• Given the current share price of ₹2060.7, the analyst price target of ₹2300.89 is 10.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.