Shares of Lupin soared over 5 percent in opening trade on January 2 to hit its highest level since April 2017 at Rs 1,381.50, buoyed by brokerage firm Nomura's bullish growth outlook for the drugmaker.
Nomura's bullish outlook on Lupin is largely driven by the drugmaker's robust US pipeline and growth in the India business amid field force expansion and strong presence in the chronic segment.
Backed by the strong trends emerging from the two key markets, Nomura raised Lupin's earnings-per-stock (EPS) estimates for FY24-26 by 2-14 percent. Not just that, the brokerage firm also revised its price target for the stock upwards to Rs 1,593 as it anticipates a 20 percent upside potential. This comes despite the strong run-up of around 80 percent in the stock in 2023 as Nomura continues to see a favourable risk-reward for Lupin.
At 09.56 am, shares of Lupin were trading 4.5 percent higher at Rs 1,372 on the NSE. Trading volumes were also sharply higher as 19 lakh shares changed hands on the exchanges so far, significantly more than the one-month daily traded average of 12-lakh shares.
The drugmaker has been investing in complex platforms, including inhalation, biosimilars, complex injectables and ophthalmic products, as it aims to shift focus towards high-margin, complex products.
Accordingly, over the next three-four years, Nomura expects approvals and launch of ophthalmic drugs and also some sole exclusivity products. "There can be potential upsides from complex injectable products and biosimilars as well," the firm noted.
Moreover, field force expansion, solid presence in the chronic segment and bolt-on acquisitions in India and other markets are other triggers that could support growth and profitability for Lupin. "We expect EBITDA
margin expansion driven by new products, cost control and operating leverage for the drugmaker," Nomura said in a note.
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In addition, the gradual ramp-up of the drugmaker's blockbuster inhalation drug Spiriva will continue to aid margin improvement for the coming quarters. Monthly sales data from IQVIA suggests that Spiriva generic is the key contributor to US sales growth in the recent quarters.
Lupin is also consistently gaining market share for Spiriva, which is at 24 percent after 18 weeks of launch. The company expects to gain 35-40 percent market share over time. "Since there is no other authorised generics in the market, and the company expects to gain additional market share without material erosion in prices," Nomura highlighted.
Spiriva is a substantial opportunity for Lupin, as the drug has a market size of $500-600 million.
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