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Lupin: Does the Price Erosion Weaken the Megatrend Story? - Views on News from Equitymaster
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  • Aug 14, 2017 - Lupin: Does the Price Erosion Weaken the Megatrend Story?

Lupin: Does the Price Erosion Weaken the Megatrend Story?
Aug 14, 2017

Lupin has announced its results for first quarter of financial year 2017-18 (1QFY18). Net sales have declined by 12.3% YoY and net profits have declined by 59.4% YoY. Here is our analysis of the results.

Performance summary
  • Topline witnessed a decline of 12.3% mainly due to price erosion in the US markets. US business declined by 27% percent this quarter as compared to last year and by 16% on a sequential basis (Q4-FY17). Domestic markets declined by 1.8% as compared to Q4FY18 but grew by 6.1% on a sequential basis. Asia pacific business grew by 10.6% Y-o-Y for the quarter. EMEA (Europe, Middle East and Africa) business grew by 3% Y-o-Y for the quarter.
  • Operating margins declined to 19.9% in Q1FY2018 as compared to 29.3% in Q1FY2017. Margins declined mainly due to higher than expected price erosion in Glumetza and appreciation in Rupee.
  • Net profits declined by 59.4% Y-o-Y for the quarter. This was mainly due to decline in Operating margins.

    Financial performance: A snapshot
    (Rs m) 1QFY17 1QFY18 Change
    Net sales 43,418 38,068 -12.3%
    Other operating income 1,259 628 -50.1%
    Expenditure 31,569 31,013 -1.8%
    Operating profit (EBDITA) 13,108 7,683 -41.4%
    EBDITA margin (%) 29.3% 19.9%  
    Other income 826.0 320.0 -61.3%
    Interest (net) 347.0 439.0 26.5%
    Depreciation 2,027.0 2,605.0 28.5%
    Profit before tax 11,560 4,959 -57.1%
    Exceptional Items 0 0  
    Tax 2,734 1,367 -50.0%
    Minority Interest 6 11  
    Profit after tax/(loss) 8,820 3,581 -59.4%
    Net profit margin (%) 20.3% 9.4%  
    No. of shares (m)   452  
    Diluted earnings per share (Rs)   45.02  
    Price to earnings ratio (x)*   20.9  

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 1QFY17 1QFY18 Change
    Domestic Formulations 9,499 9,324 -1.84%
    (% of revenues) 26.40% 22.50%  
    Export Formulations 30,953 25,951 -16.16%
    (% of revenues) 65.10% 71.40%  
    API 2,966 2,793 -5.83%
    (% of revenues) 8.50% 6.10%  
    Total 43,418 38,068 -12.32%
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