Shares of Lupin rose over 6 per cent on the BSE on Thursday after brokerage Kotak Securities upgraded the pharma company's stock rating twice to 'add'.
KIE's bullish outlook on Lupin is driven by the drugmaker's strong portfolio in the US, which is likely to positively beat Street estimates in the US in fiscal 2025 and 2026.
Given this, the brokerage also raised its target price for Lupin by almost 30% to Rs 1,805, reflecting an upside potential of around 11% from its previous close. This despite the stock having gained over 88% in the past year.
Kotak sees Lupin lining up several products, which he expects will limit revenue decline in 2027 after a strong 2026, despite a sharp decline in albuterol sales over the next two years.
Kotak expects Lupin’s strong US sales trajectory to continue amid a stable US generic pricing environment, despite the declines in albuterol and Suprep in FY25. While Spiriva and albuterol will continue to be significant contributors to Lupin’s earnings in FY25 and FY26, the brokerage believes Mirvetric and Tolvaptan will make the pharma company’s next fiscal year a standout. Tolvaptan is expected to be launched in Q1 FY26.
The report added that gMyrbetriq and Tolvaptan will be key drivers for LPC’s US sales in FY25E and FY26E, respectively. In particular, FY2026 will be a notable year for LPC in the US, aided by the launch of Tolvaptan in April 2025. Accordingly, LPC’s US sales are expected to grow by 12% YoY and 11% YoY in FY25E and FY26E, respectively.
Lupin shares surged over 5.22% to Rs 1,714.10 during the trading session on Thursday, taking its total market capitalization to over Rs 78,000 crore. The stock had closed at Rs 1,630.80 in the previous trading session on Wednesday.
“We have considered an incremental hit to LPC’s albuterol sales given the expected launch of Amphastar in 2QFY25 and likely launch of Amneal in 2QFY25. Like albuterol, the cap on OOP cost of inhalers has not yet impacted gSpiriva’s pricing and market share,” Kotak said.
“Given Otsuka’s reported US sales of $1.2 billion in CY2023 and LPC’s 180-day exclusive license from April 2025, we believe the opportunity for Tolvaptan in FY26E will significantly exceed Street estimates. Even post-exclusivity, we expect Tolvaptan to remain a relatively uncompetitive product with Teva, Apotex and Sun as other known Para IV applicants,” it said.
Lupin's share price has nearly tripled in the past two years from its June 2022 level of Rs 610, up nearly 180%. The stock has gained almost 100% in the past one year. The stock has gained 30% so far in 2024.
Kotak raised FY25-27E EPS by 3-16%, and expanded by 370bp compared to FY2024-26E, driven by higher US revenue and Ebitda margins. We still believe there is room for additional positive surprises if LPC continues to gain share from gSpiriva and if there is a lesser-than-expected hit from albuterol competition.
“We expect the stock to trade at a PE multiple of 25x by June 2026 (from 22x earlier), driven by better medium-term revenue and margin outlook, lower licensed mix in India and Empagliflozin being the only drug to go off patent in the medium term.” It also upgraded the stock twice from “sell” to “add” and revised its target price to Rs 1,800 from Rs 1,405 earlier.
disclaimer:Disclaimer: The views and investment tips of the experts in this News18.com report are theirs alone and do not represent the views of the website or its management. Users are advised to consult with a qualified professional before making any investment decisions.