Prabhudas Lilladher has reaffirmed its Buy rating for Lupin (LPC), raising the target price to Rs 2,420. This revision underscores confidence in Lupin’s strong performance in the U.S. market, substantial domestic growth, and strategic cost optimization. With an impressive 41% YoY EBITDA growth, Lupin’s Q2FY25 results exceeded expectations, driven by a robust product pipeline, favorable cost measures, and ongoing regulatory progress. Below, we break down the key insights and projections that support Prabhudas Lilladher’s positive outlook.

Q2FY25 Financial Highlights Reflect Strong Performance

Revenue Growth Supported by Domestic and Global Markets: Lupin reported a 13% YoY increase in revenue, reaching Rs 57 billion, surpassing the projected Rs 56.1 billion. This growth was primarily fueled by a 19% YoY increase in domestic formulations and significant contributions from European and growth markets. However, the U.S. business faced a 3% sequential decline, largely due to competitive pressures affecting products like Suprep and gDoxycycline.

Margin Improvement Amidst Strategic Cost Control: Adjusted EBITDA rose to Rs 13.1 billion, reflecting a 41% YoY increase and surpassing expectations by 3%. The EBITDA margin held steady at 23%, supported by a better product mix and cost optimization strategies, underscoring Lupin’s continued focus on profitability.

U.S. Pipeline and Regulatory Progress Drive Future Growth

Clearance from USFDA and Pipeline Expansion: Lupin has successfully resolved regulatory concerns with the U.S. FDA, paving the way for further product launches. The company’s U.S. pipeline includes 20 respiratory and 40 injectable products, emphasizing its commitment to complex generics. Recent launches, such as gMyrbetriq and gPredForte, have strengthened Lupin’s position in the competitive U.S. market.

Pipeline Supported by Niche Generics: Upcoming launches, including products like gTolvaptan, gLiraglutide, and gGlucagon, are expected to boost Lupin’s U.S. sales, contributing to the company’s strategy to capture higher-margin opportunities in complex generics.

Growth Across Key Markets Bolsters Revenue Base

Domestic Market Performance and Chronic Portfolio Growth: Lupin’s domestic formulation sales surged by 19% YoY, driven by strong performance in the tender and institutional business. Chronic therapies such as Diabetes and Cardiology registered robust growth, with the chronic portfolio now comprising 62% of domestic revenues.

Steady Growth in EMEA and Other Regions: The EMEA region recorded a 19% YoY increase, benefiting from key products like Zaxine in Canada and Luforbec in the UK. Lupin’s international growth strategy has contributed significantly to its overall revenue, with ROW markets also showing a healthy 12% YoY increase.

Financial Adjustments and Forecasts for FY26-FY27

EBITDA and PAT Growth Projections: Prabhudas Lilladher projects a 26% CAGR in EBITDA and a 33% CAGR in PAT from FY24 to FY27, driven by revenue expansion and cost efficiencies. The EBITDA margin is expected to sustain at 22-23% levels, given the company’s focus on high-margin products and efficiency gains.

EPS and Target Price Revisions: With the continued positive outlook, Prabhudas Lilladher has revised its target price for Lupin to Rs 2,420, based on a 27x multiple of the projected EPS for September 2026. The forecasted EPS for FY26 and FY27 remains largely unchanged, reflecting confidence in Lupin’s sustainable profitability trajectory.

Risks and Challenges to Monitor

Potential Competition for Key Products: Lupin’s U.S. revenue growth is partially dependent on limited competition for niche products. Any increase in competition for high-value generics like gSpiriva could impact revenue and margin targets.

Regulatory and Launch Delays: Although Lupin has made strides with the USFDA, delays in launching critical products in the U.S. market could affect short-term revenue targets. Additionally, the successful commercialization of its Ranibizumab biosimilar, expected in FY26, is contingent on regulatory approvals.

Valuation and Investment Rationale

Target Price of Rs 2,420 Reflects Optimism in Growth Prospects: The target price of Rs 2,420 reflects Prabhudas Lilladher’s bullish stance on Lupin, supported by solid fundamentals, a favorable product pipeline, and sustained growth in key markets. The valuation aligns with Lupin’s projected revenue growth and enhanced EBITDA margins, making it a compelling investment within the pharmaceutical sector.

Long-Term Buy Recommendation: Prabhudas Lilladher’s Buy recommendation is underpinned by Lupin’s strong performance, operational efficiencies, and strategic market positioning. The stock presents a promising opportunity for long-term investors, especially as Lupin capitalizes on its growth potential in domestic and international markets.