Lupin Q3 net profit gets tax reversal boost but margins sink

Drugmaker Lupin Ltd posted strong growth in net profit for the quarter ended December 31, 2021, boosted by one-time tax reversal gains, but it reported poor operating profit numbers as its margins sank.

Lupin’s net profit shot up 24.4% from a year earlier to Rs 545.5 crore. However, factoring out tax reversal of Rs 382 crore during the quarter, profit was below what analysts had expected.

Profit before tax declined to Rs 167.1 crore from Rs 524.7 crore in the third quarter of last fiscal year. Excluding one-time expenses, profit before tax was Rs 360.3 crore.

The company’s revenue rose 3.6% to Rs 4,160.9 crore, almost in line with expectations.

Lupin’s share price slipped over 2% in early trade on Friday. The company declared results for the third quarter late on Thursday night.

Lupin is the sixth-largest company in the Indian pharmaceutical market and the third-largest pharmaceutical player in both the US generic market and US total market by prescriptions.

The company filed three abbreviation new drug applications (ANDA) during the quarter. It also received three ANDA approvals from the US FDA, and launched two products in the quarter in the US market. It now has 167 products in the US generics market.

Other key highlights

1) EBITDA stood at Rs 403.9 crore, down 49.5% from the previous year and 35.7% from Q2 FY22.

2) Excluding one-time expenses of Rs 193.2 crore, EBIDTA was Rs 597.1 crore.

3) EBITDA margin halved to 9.9% from 20.4% a year earlier and down from 15.7% in Q2 FY22.

4) Formulations business revenue grew 7.2% to Rs 3,831.1 crore, led by North America (9.4%) and India (7.8%).

5) Revenue from API business declined 25.4% over the year-ago period.

6) Investment in R&D amounted to Rs 354.6 crore (8.7% of sales) for Q3, compared with Rs 330 crore (8.2% of sales) for Q2.

Management commentary

Nilesh Gupta, Managing Director at Lupin, said the company is on the path of sustained growth across markets.

“Our inhalation portfolio continues to build share in the US and helped register double-digit growth sequentially, despite pricing and demand challenges on seasonal products,” he said.

“The inflationary environment has impacted margins, but we remain focussed on margin and EBIDTA improvement as we deliver on key product launches, cost optimization and improving efficiencies, especially by H2 FY23,” he added.