Lupin: What after Q4FY19 results?
Lupin, one of the largest pharmaceutical companies in India, posted a decent set of numbers for its fourth quarter of FY19. The sales numbers were in line with the street estimates. The topline posted by the company was Rs 4406 crore, which was up by 9 per cent on a yearly basis. Nonetheless, there were some misses and hits in the segmental revenue. The US sales numbers were higher than expected, led by inventory push for launch of gRanexa under exclusivity. The revenue from APIs was below the estimates, which were down by 20% on a sequential basis. The domestic revenue grew by 9 per cent on a yearly basis and sales from Asia-Pacific (APAC) were also in line.
The operating profit grew by 23 per cent on a yearly basis to Rs 872 crore, which was better than the street estimates. The reason for such improvement was the exclusive launch of gRanexa in the US market, which generated better sales, along with cut in R&D spend.
The net profit reported by the company, however, was far behind the analysts' estimates. The company posted net profit of Rs 287 crore as against the expectation of Rs 367 crore. The reason for the miss was the higher tax outgo. The total tax for Q4FY19 was around Rs 299 crore, which is almost 50% of the profit before tax as against the expectation of 27%.
Going ahead, we see the company facing some challenges that will keep its stock price under check. Four of its facilities are already under regulatory issues. Out of those, Pithampur Unit -2 (under warning letter), Mandideep Unit 1 (18 observations), and Somerset facility (six observations) classified under official action indicated (OAI) and Goa plant (under warning letter) got two observations during re-inspection. Besides, the company will also see a higher tax outgo in the near future.
Therefore, despite the company’s focus on cost optimisation such as rationalisation of manpower, efficient procurement of key raw material and improvement in supply chain management, we see the company underperforming the market.