Fundamental Analysis Of Lupin: Medicines are substances that can be used to prevent, treat, or cure disease. Pharmaceutical companies in India have come a long way in supplying medicines, and with more research, they are improving their products. In this article, we will look at the Fundamental Analysis of Lupin Limited, a company in the pharmaceutical industry.

Lupin Company Logo

Fundamental Analysis Of Lupin

Desh Bandhu Gupta founded Lupin in 1968 with Rs. 5,000 borrowed from his wife. He expanded his business by establishing Lupin’s first manufacturing plant and supplying iron and folic acid tablets for the Government of India’s flagship program to improve mother and child health. The company was headquartered in Mumbai.

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The company’s position in the US prescription market is third, with 911+ active patents, sixth in the Indian pharma market, and 463 ANDAs (Abbreviated New Drug Application—potential approval for generic medicines from the US FDA).

Segment Analysis

The company’s revenue was Rs. 16,269.98 crore in FY23. Revenue is primarily derived from the sale of pharmaceutical goods (99.65%), service income (0.15%), and the remaining 0.20% from income from research services and the sale of intellectual property (IP). 

India generates 39.55% of revenue, the United States generates 31.70%, and the rest of the world generates 28.74%.

Industry Analysis

Shortly, the Indian pharmaceutical industry is predicted to develop at a CAGR of 22.4%, while the medical device market is expected to rise by US$25 billion by 2025. India is the world’s second-largest contributor of biotech and pharmaceutical workers. The prices are regulated in India, which in turn puts pharma companies in control of drug prices and makes them affordable.

The Indian pharmaceutical market is expected to reach US$130 billion by 2030. Meanwhile, the global market for pharmaceutical products is expected to exceed $1 trillion by 2023.

India is the world’s second-largest contributor of biotech and pharmaceutical workers.

According to government estimates, the Indian pharmaceutical business is worth around US$50 billion, with exports accounting for more than US$25 billion of that value. India accounts for around 20% of worldwide generic medication exports.

Lupin – Financials

Revenue and Net Profit

The company reported its revenue for FY23 at Rs. 16,641.66 crore as compared to Rs. 16,405.48 crore in FY22. The 4-year CAGR stood at 3.21%. Revenue increased by 1.43% year over year and has remained stable for the past four years.

In FY23, net profits were Rs. 447.69 crore, compared to a loss of Rs. -1,509.72 crore in FY22. The CAGR stood at -3.57%. The losses in FY22 were caused by patent litigation expenses, which were settled for Rs. 1,878.38 crore and recorded as business compensation expenses. Excluding that, profit is Rs. 505.80 crore, a decrease from the previous year.

Financial YearRevenue (Cr.)Net Profit (Cr.)
2022-23₹ 16,641.66₹ 447.69
2021-22₹ 16,405.48₹ -1,509.72
2020-21₹ 15,162.96₹ 1,226.6
2019-20₹ 15,374.76₹ -403.82
2018-19₹ 14,664.56₹ 517.27
CAGR (4 Years)3.21%-3.57%

Profit Margins

The company’s OPM in FY23 was 10.33%, up from 1.31% in FY22. The increase in OPM was due to better cost control, and the average over 5 years was 12.26%.

NPM in FY23 stood at 3% as against -9% in FY22. The decline in FY22 was due to one-time litigation expenses, and growth has slowed. The profits are subdued due to flat topline growth. The average stood at 0.61% over 5 years.

Financial YearOPM (%)NPM (%)
2022-2310.33%3%
2021-221.31%-9%
2020-2116.92%8.10%
2019-2015.31%-2.60%
2018-1917.46%3.55%
Average (5 Years)12.26%0.61%

Return Ratios

The company’s RoE in FY23 was 3%, up from -12% in FY22, and the 5-year average was 0.25%. The RoE is in line with the FY22 growth rate, excluding one-time expenses.

RoCE in FY23 is 8%, as compared to -9% in FY22. The average over 5 years stood at 4.42%. However, RoCE outperformed RoE, indicating better fund utilization.

Financial YearRoE (%)RoCE (%)
2022-233%8%
2021-22-12%-9%
2020-219.47%9.71%
2019-20-3.09%5.45%
2018-193.88%7.97%
Average (5 Years)0.25%4.42%

Debt Analysis

The Debt to Equity ratio stood at 0.34 as compared to 0.32 in FY22. The debt is manageable, but interest expense eats into profits, and debt reduction allows the company to make acquisition decisions.

The interest coverage ratio was 3.82 times in FY23, up from 0.20 times in FY22. The average over 5 years stood at 5.13 times. The ratio indicates that interest costs are comfortably covered, but the low profits cause interest costs to affect the ratio.

Financial YearDebt to EquityInterest Coverage
2022-230.343.82
2021-220.320.2
2020-210.3512.92
2019-200.513.09
2018-190.635.66
Average (5 Years)0.435.13

Fundamental Analysis Of Lupin – Key Metrics

List of some of the Key Metrics of Lupin Ltd.

ParticularsAmountParticularsAmount
CMP₹ 1,407.15Market Cap (Cr.)₹ 64,021
EPS (TTM)₹ 29.24P/E (TTM)48.09
RoE3%RoCE6.06%
Dividend Yield0.62%Price to Book Value4.3
Debt to Equity0.34Interest Coverage3.82
Enterprise Value (Cr.)₹ 58,796.01Net Profit Margin3%

Future Plans Of Lupin

  • In FY24, the company intends to launch gSpiriva (Tiotropium), gDarunavir, and other niche products in the United States, as well as gFostairin in Europe.
  • With its product portfolio, the company hopes to increase its presence and market share in Latin America.
  • Spiriva, Diazepam Gel, and Nascobal Nasal Spray are expected to drive profitable growth in the US market.
  • With the United States being the world’s largest pharmaceutical market, the company is looking to increase its R&D on certain products that are experiencing margin pressure to improve its products and reduce value erosion.

Conclusion

We will take a quick Fundamental Analysis Of Lupin company as we near the end.

The company has the potential to grow in the pharmaceutical space, but stagnant revenues and global challenges make revenue growth difficult. The introduction of new products may aid the company’s growth through diversification. The low net profit margin raises concerns because interest costs consume a larger portion of EBITDA. What do you think about the potential of this company? Let us know your views in the comments section below.

Written by Santhosh

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