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Lupin: Decline in US Business Impacts Overall Growth - Views on News from Equitymaster
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  • May 29, 2017 - Lupin: Decline in US Business Impacts Overall Growth

Lupin: Decline in US Business Impacts Overall Growth
May 29, 2017

Lupin has announced its 4QFY17 results. Net sales have grown by 1.3% YoY and net profits have declined by 49.2% YoY. Here is our analysis of the results.

Performance summary
  • Topline witnessed muted growth of 1.3% mainly due to price erosion in the US and domestic markets. US business declined by 13% percent this quarter as compared to last year and also on a sequential basis (Q3). Domestic markets declined by 11% as compared to Q3FY17 but grew by 14% as compared to Q4FY16. Asia pacific business grew by 35% Y-o-Y for the quarter. EMEA (Europe, Middle East and Africa) business grew by 23% Y-o-Y for the quarter.
  • Operating margins declined to 18.4% in Q4FY2017 as compared to 31.3% in Q3FY2016. Margins declined mainly on account of forex fluctuations and a one-time provision of around Rs. 1.5 billion that Lupin had to make related to its Australian subsidiary for a patent infringement case.
  • Net profits declined by 49.2% Y-o-Y for the quarter. This was mainly due to decline in Operating margins and increase in R&D expenses.

    Financial performance: A snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Net sales 41,090 41,619 1.3% 137,579 171,198 24.4%
    Other operating income 884 914 3.4% 4,977 3,745  
    Expenditure 28,827 34,719 20.4% 105,702 130,012 23.0%
    Operating profit (EBDITA) 13,148 7,814 -40.6% 36,854 44,931 21.9%
    EBDITA margin (%) 31.3% 18.4%   25.9% 25.7%  
    Other income 348.9 453.4 30.0% 1,852 1,065 -42.5%
    Interest (net) 310.5 406.2 30.8% 595 1,525 156.5%
    Depreciation 1,487.2 2,674.2 79.8% 4,871 9,122 87.3%
    Profit before tax 11,699 5,187 -55.7% 33,239 35,349 6.3%
    Exceptional Items 19 16   49 83  
    Tax 4,188 1,367 -67.4% 10,593 9,785 -7.6%
    Minority Interest 51 34   88 72  
    Profit after tax/(loss) 7,479 3,802 -49.2% 22,607 25,575 13.1%
    Net profit margin (%) 18.2% 9.1%   16.4% 14.9%  
    No. of shares (m)         451.6  
    Diluted earnings per share (Rs)         56.6  
    Price to earnings ratio (x)*         19.6  

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Domestic Formulations 7,722 8,788 13.80% 34,486 38,157 10.64%
    (% of revenues) 26.40% 22.50%   27.40% 22.50%  
    Export Formulations 30,415 30,016 37.64% 90,624 121,658 34.25%
    (% of revenues) 65.10% 71.40%   62.90% 70.90%  
    API 2,953 2,815 -4.67% 12,469 11,383 -8.71%
    (% of revenues) 8.50% 6.10%   9.70% 6.50%  
    Total 41,090 41,619 28.13% 137,579 171,198 24.44%
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