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Lupin: US market Declines Due to Higher Base Effect of FY17 - Views on News from Equitymaster

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  • Feb 9, 2018 - Lupin: US market Declines Due to Higher Base Effect of FY17

Lupin: US market Declines Due to Higher Base Effect of FY17
Feb 9, 2018

Lupin has announced its results for the third quarter of financial year 2017-18 (3QFY18). Net sales have declined by 11.5% YoY and net profits have declined by 65% YoY. Here is our analysis of the results.

Performance summary
  • Topline witnessed a decline of 11.5% mainly due to price erosion in the US markets. US business declined by 34% percent this quarter as compared to last year but grew by 5.2% on a sequential basis (Q2-FY18). Domestic markets grew by 7.8% as compared to last year but declined by 7.8% on a sequential basis. Asia pacific business grew by 20.4% Y-o-Y for the quarter. EMEA (Europe, Middle East and Africa) business grew by 6.5% Y-o-Y for the quarter.
  • Operating margins declined to 17.3% in Q2FY2018 as compared to 24% in Q2FY2017. Net profits declined by 65% Y-o-Y for the quarter. Margins declined mainly due to higher base effect due to exclusive launches last year.

    Financial performance: A snapshot
    (Rs m) 3QFY17 3QFY18 Change 9MFY17 9MFY18 Change
    Net sales 44,049 39,004 -11.5% 129,579 115,814 -10.6%
    Other operating income 779 753 -3.4% 2,831 2,156  
    Expenditure 32,642 32,873 0.7% 96,243 94,682 -1.6%
    Operating profit (EBDITA) 12,186 6,883 -43.5% 36,167 23,288 -35.6%
    EBDITA margin (%) 27.2% 17.3%   27.3% 19.7%  
    Other income 1,032.9 284.2 -72.5% 1,562 1,154 -26.1%
    Interest (net) 484.4 540.0 11.5% 1,119 1,458 30.3%
    Depreciation 2,309.1 2,803.5 21.4% 6,448 8,130 26.1%
    Profit before tax 10,426 3,824 -63.3% 30,162 14,853 -50.8%
    Exceptional Items 0 0   42 17  
    Tax 4,095 1,608 -60.7% 8,418 4,516 -46.4%
    Minority Interest -24 -6   -24 -6  
    Profit after tax/(loss) 6,355 2,222 -65.0% 21,810 10,359 -52.5%
    Net profit margin (%) 14.4% 5.7%   16.8% 8.9%  
    No. of shares (m)         452.1  
    Diluted earnings per share (Rs)         31.3  
    Price to earnings ratio (x)*         26.0  

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 3QFY17 3QFY18 Change
    Domestic Formulations 9,912 10,688 7.8%
    (% of revenues) 26.40% 22.50%  
    Export Formulations 31,453 25,636 -18.5%
    (% of revenues) 65.10% 71.40%  
    API 2,684 2,680 -0.1%
    (% of revenues) 8.50% 6.10%  
    Total 44,049 39,004 -11.5%
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