Lupin earnings beat highlights broad-based growth amid FY27 consolidation

1QFY27 Performance Beat

Lupin delivered a better-than-expected 1QFY27 performance, with revenue and EBITDA 5% and 15% above Motilal Oswal Financial Services’ estimates, respectively. Consolidated revenue rose 32% year on year to Rs 8,276 crore, compared with the broker’s estimate of Rs 7,890 crore. EBITDA increased 50.1% to Rs 2,464 crore, while EBITDA margin expanded 360 basis points year on year to 29.8%, versus the estimated 27.2%.

The margin improvement was led largely by a 310-basis-point expansion in gross margin to 74.8%. Adjusted PAT grew 24.4% year on year to Rs 1,425 crore, modestly above the Rs 1,360 crore estimate, but lagged EBITDA growth because of higher depreciation, interest expense and the effective tax rate.

Broad-Based Growth Across Geographies

Growth was broad based across geographies. US sales grew 43% year on year to Rs 3,435 crore, or 30% in constant currency to USD 366 million, driven by base-business volume growth, recent launches and a better portfolio mix.

Lupin received six ANDA approvals and launched three products during the quarter, taking its marketed US generic portfolio to 149 products. The company remains number three in the US generic market by prescriptions, with 56 market-leading products and 112 products ranked in the top three.

India formulations sales grew 13.9% year on year to Rs 2,380 crore, supported by 15.1% growth in prescription formulations. Other developed markets and emerging markets grew 48.3% and 51.7% to Rs 1,149 crore and Rs 990 crore, respectively. API sales grew 8.5% to Rs 264 crore.

India Formulations Remain a Key Growth Driver

The domestic formulations business continued to outperform through chronic therapies, new launches and existing-brand recall. Chronic sales increased 21.5% year on year and contributed about 67% of India sales, compared with about 65% in FY26. Growth was led by diabetes, cardiology and respiratory therapies.

Anti-diabetes sales grew 31.8%, aided by the diabetes franchise and GLP-1 preparations. Lupin launched seven brands during 1QFY27 and plans more than 20 product launches in FY27.

Motilal Oswal forecasts India revenue CAGR of 13% over FY26-28E, driven by chronic outperformance, a favourable diabetes and respiratory mix, new launches, deeper penetration and sales-force expansion.

Management Guidance and US Outlook

Management reiterated FY27 guidance for high-single-digit revenue growth and an EBITDA margin of about 25%. It guided for R&D spend of about 8% of sales and an effective tax rate of 27-28%. Management expects FY27 US revenue of USD 1.1-1.2 billion and quarterly US revenue of USD 250-280 million in the next few quarters, reflecting pricing and market-share pressure in Tolvaptan and Mirabegron.

Management expects US growth to return from FY28, supported by exclusive first-to-file opportunities, biosimilars and 505(b)(2) products.

Pipeline and New-Launch Opportunities

The US pipeline includes more than 15 planned launches and more than 15 ANDA filings in FY27. Lupin has 50 first-to-file opportunities, including 21 exclusives, along with over 45 injectable products and more than 20 inhalation products under development.

The company intends to derive over 65% of new-launch revenue from complex products by FY31 and plans to launch over five biosimilars by FY31.

Despite these opportunities, Motilal Oswal expects only a 4% US revenue CAGR over FY26-28E, as launches and base-portfolio growth are likely to be offset by price erosion, higher competition and product-specific loss-of-exclusivity impacts.

Earnings Outlook and Valuation

Motilal Oswal reduced its FY27 earnings estimates by 6% to reflect higher depreciation and tax. The broker expects FY27 to be a consolidation year after three years of strong earnings growth, with earnings broadly stable over FY26-28E as product competition and the gestation period for new growth drivers weigh on performance.

Motilal Oswal maintains a Neutral rating, valuing Lupin at 22 times 12-month forward earnings for a target price of Rs 2,500.

Key Constraints on the Thesis

• Limited upside from the prevailing share price.
• Increased competition and US pricing pressure.
• Delayed offset from the niche-product pipeline.