Rakesh Jhunjhunwala’s favourite pharma stock slips over 7% post Q1 results

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Shares of Lupin declined over 7% in Wednesday’s afternoon trade despite stellar Q1 performance. The pharma firm on Tuesday posted a 5-fold rise in its consolidated net profit at Rs 542.46 crore for the quarter ended June 30, 2021. It had posted a net profit of Rs 106.90 crore for the corresponding period of the previous fiscal.

The significant jump in June quarter net profit was on account of robust sales and income received from biopharmaceutical firm Boehringer Ingelheim for achieving key milestones for its novel MEK inhibitor compound collaboration.

Brokerage view

Brokerage ICICI Securities said that Lupin’s Q1FY22 performance was missed on margins, while revenues were in line driven by $50 million licensing income and strong domestic growth. It further added that resolution of warning letters and clearance of Official Action Indicated (OAIs) status on plants could be the near term overhang along with progress on the margins front. Barring Covid-19 impact, growth in India to remain consistent but remains lumpy for APAC. Like other Pharma majors, Lupin has also chalked out a product and cost rationalisation drive.

Yash Gupta, equity research associate, Angel Broking said, “Lupin has reported good growth in topline as well as the bottom line, but below the market expectations as Q1FY21 was the low base for the company due to Covid related disruptions. The company has reported a dip in gross profit margins from 65% to 63.9% QoQ. We expect the domestic market to continue its momentum for the next couple of quarters. We have a neutral outlook on Lupin.”

Lupin is also one of the favourite stocks of ace equity investor Rakesh Jhunjhunwala. He held 1.6% stake, or 7,245,605 shares, in the company as of June 30.

Consolidated revenue from operations of the company stood at Rs 4,237.39 crore for the quarter under consideration. It was at Rs 3,468.63 crore for the same period a year ago, it added.

“While the quarter’s profits were bolstered by the Boehringer Ingelheim MEK program income, despite a tough operating environment, we see substantial room for growth. We remain committed to grow our US business both with our inline products as well as ramp-up of Albuterol and Brovana, to continue above-market growth in India, and ensure growth in every part of the business. We see meaningful uplift in the second half and remain focused on our journey of expanding margins through driving strong double-digit revenue growth and optimizing costs, while ensuring the safety of our people and the highest standards of compliance,” Lupin MD Nilesh Gupta said.

Shares of Lupin traded 7.14% lower at Rs 1,039 at around 12.10 pm (IST). On the other hand, the benchmark BSE Sensex traded 0.63% down at 54,212 at around the same time.

While commenting on the healthcare sector, Jhunjhunwala in an earlier interaction with a business channel said that healthcare consumption in India will hit the roof and the country will become one of the biggest pharma centres in the world. There is a long way to go.

“40% of all medicines consumed in the US are from the Indian pharma sector. The sector also has a massive home market,” said Jhunjhunwala.