Brokerages Cut Estimates For Lupin On U.S. Price Erosion, Cost Inflation

Analysts cut earnings estimates for Lupin Ltd. as its near-term outlook remains uncertain amid intensified competition in the U.S. base portfolio, lower U.S. sales, rise in operational costs, pending U.S. FDA issues at three plants and subdued margin.

The drugmaker reported a Rs 518-crore after-tax loss in the quarter ended March against a Rs 296-crore consensus profit estimate by analysts. It also reported its lowest-ever margin of 6%.

According to Executive Director and Group Chief Financial Officer Ramesh Swaminathan, underperformance in key markets—the U.S. and India—dragged down the drugmaker’s performance. While Q4 is always a weaker quarter for India, the U.S. market was plagued with drug recalls due to impurities and price erosion in some products, he told BQ Prime in an interview on Thursday.

Lupin’s India sales rose 5% over the year earlier, while the U.S. business fell 5%, leading to an overall revenue growth of 3% during the quarter.

Shares of the company were volatile. The stock gained as much as 1.32% and then lost 1.4%. It was trading 0.27% higher as of 10:30 a.m. on Friday.

Of the 43 analysts tracking the company, 13 each recommend a ‘buy’ and a ‘sell’, and 16 suggest a ‘hold’, according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 18.8%.

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