Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Lupin: Base effect mars performance - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Lupin: Base effect mars performance

Nov 19, 2004

Performance Summary
Domestic pharma company, Lupin, announced dismal results in 2QFY05. While the topline has declined by 8.5%, the operating profit has declined at a faster rate of 60% YoY. The net profit however, has increased by about 20 times, which does not show the true picture, as this rise in profit is on back of some extraordinary expenses last year.

(Rs m) 2QFY04 2QFY05 Change 1HFY04 1HFY05 Change
Net sales 3,457 3,164 -8.5% 6,094 6,154 1.0%
Total expenditure 2,679 2,839 6.0% 4,738 5,457 15.2%
EBITDA 778 325 -58.3% 1,356 697 -48.6%
EBITDA margin 22.5% 10.3%   22.2% 11.3%  
Other income 83 12 -85.9% 127 51 -60.0%
Interest expenses 150 62 -58.5% 309 133 -56.9%
Depreciation 71 81 15.0% 140 160 14.5%
Profit before tax 641 193 -69.9% 1,033 455 -56.0%
Extraordinary items 509 -   509 -  
Tax 123 18 -85.5% 235 73 -68.8%
Profit after tax 9 175 1933.7% 289 381 31.8%
Net profit margin 0.2% 5.5%   4.7% 6.2%  
No. of shares 40 40   40 40  
Diluted earnings per share* 0.9 17.4   14.4 19.0  
P/E ratio (X)       44.9 34.0  

About the company
Lupin is a domestic pharma company with strong presence in cephalosporins and anti-TB segments (constituting more than 75% of the total sales in FY04). In the recent past, the company has managed to diversify its revenue mix (segment wise as well as geographically). About 50% of its revenues in FY04 were from international business. The company currently has 5 ANDA approvals with 13 filings and 21 DMF's with US FDA.

What has driven performance in 2QFY05?
High base effect: Net sales declined by 8.5% in the current quarter. The major reason for decline in sales was the base effect. The higher base in the same quarter last years was on account of the launch of Cefuroxime Axetil in the US generics space. Total revenues from this drug in FY04 was Rs 354 m. However, with competition increasing, there was a sharp fall in prices as well as loss of market share for Lupin. In the domestic market, retail sales grew by 13% YoY, while the overall growth in the Indian operations stood at 11%. In the quarter, the company launched 9 new products in the domestic market.

Higher R&D and marketing expenses: The R&D expenses increased by 144% in the current quarter, driven by the company's focus on creating intellectual property. Besides, other expenses increased by 27% YoY with marketing and sales promotion constituting a major portion of this increase. During the quarter, company incurred Rs 73 m (2% of sales) towards sales promotion of one of its brands 'Suprax' in US.

Cost Break up
  2QFY04 2QFY05 Change
Raw material 1,632 1,408 -13.7%
(as % of sales) 47.2% 44.5%  
Staff cost 236 317 34.1%
(as % of sales) 6.8% 10.0%  
R&D expenditure 75 183 143.3%
(as % of sales) 2.2% 5.8%  
Other expenditure 736 932 26.6%
(as % of sales) 21.3% 29.5%  
Total 2,679 2,839 6.0%

Net Profit falls: Net profit saw an increase of 20 times. However, this must be viewed with retrospect that the company has to shell out extraordinary expenses to the tune of Rs 509 m in the same quarter last year. If one excludes this effect, the net profit has actually declined by 66%. The tax provision has come down due to increased R&D expenses and sales from one its facilities, which has been granted EOU status (export oriented unit).

What to expect?
At Rs 645, the stock is trading at a price to earnings multiple of 34 times 1HFY05 earnings. Lupin is one of the strongest players in cepholosporins and anti-TB segment in the domestic market. Both these drugs involve complex technology of manufacturing, which suggest Lupin's strength in high technology front. New initiatives in increasing sales in the US generics market and the fermentation technology that company has are long-term positives. But the volatility in earnings is a cause of concern and to that extent, the risk profile is on the higher side.

Equitymaster requests your view! Post a comment on "Lupin: Base effect mars performance". Click here!


More Views on News

LUPIN Announces Quarterly Results (4QFY19); Net Profit Down 1.5% (Quarterly Result Update)

May 17, 2019 | Updated on May 17, 2019

For the quarter ended March 2019, LUPIN has posted a net profit of Rs 3 bn (down 1.5% YoY). Sales on the other hand came in at Rs 44 bn (up 77.8% YoY). Read on for a complete analysis of LUPIN's quarterly results.

LUPIN LTD Announces Quarterly Results (3QFY19); Net Profit Down 149.7% (Quarterly Result Update)

Feb 13, 2019 | Updated on Feb 13, 2019

For the quarter ended December 2018, LUPIN LTD has posted a net profit of Rs 2 bn (down 149.7% YoY). Sales on the other hand came in at Rs 45 bn (up 78.0% YoY). Read on for a complete analysis of LUPIN LTD's quarterly results.

LUPIN LTD 2017-18 Annual Report Analysis (Annual Result Update)

Aug 16, 2018 | Updated on Aug 16, 2018

Here's an analysis of the annual report of LUPIN LTD for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of LUPIN LTD. Also includes updates on the valuation of LUPIN LTD.

Lupin: US market Declines Due to Higher Base Effect of FY17 (Quarterly Results Update - Detailed)

Feb 9, 2018

Price erosion in generic US drugs continues but seems to be bottoming out.

Lupin: US Markets Drags down Revenues and Net Profits (Quarterly Results Update - Detailed)

Nov 2, 2017

Domestic markets registers robust growth in the quarter

More Views on News

Most Popular

My Top 7 Stocks to Profit from Sensex 100,000(The 5 Minute Wrapup)

May 16, 2019

Tanushree Banerjee explains everything you need to know about the Rebirth of India and Sensex 100,000.

3 Stocks to Bet on to Become a 'Dividend Millionaire'(Profit Hunter)

May 14, 2019

As markets continue to rattle amid earning season, upcoming elections, volatile crude price and US China trade war, it's a great idea to add some stability to your portfolio by adding dividend stocks.

Indian Steel: The Perfect Multibagger Opportunity(Profit Hunter)

May 17, 2019

A structurally strong Indian Steel Industry will help India achieve 8%+ GDP growth in the coming years.

My Top 7 Stocks to Buy as Modi Returns to Power(The 5 Minute Wrapup)

May 23, 2019

The Modi government is all set to come back to power. With a stable government at the centre, how should you play the stock market?

What Makes TVS Srichakra and CCL Products a Cut Above the Rest?(The 5 Minute Wrapup)

May 17, 2019

Despite the commodity nature of their businesses, these two stocks have rewarded shareholders well.


Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms


May 24, 2019 (Close)