Indoco Remedies Ltd. share price target

Discontinuing coverage - Regulatory Challenges Overshadow

Product diversification to propel revenue and profitability

Indoco Remedies' (INDR) reported another muted quarter in a regulated market performance; management expects to recover in coming quarters given strong order book and new launches. Domestic market continued to witnessed growth on low base in therapies like anti-infective, GI, VMN and Opthal. We remain structurally positive on INDR on account of 1) MR productivity enhancement and higher penetration in North and East markets 2) new launches in US and 3) higher tender business in EU market. This will...

Formulation exports accounted for 40% (regulated markets:81%) of revenues while APIs contributed 8% with remaining coming from CRAMS Q3FY22 Results: Indoco reported revenue growth due to traction in domestic...

Domestic formulation continues to register strong growth Indoco Remedies' (INDR) Q2FY22 performance was muted in regulated market, but should recover with pick up in profit share from Brinzolamide in US and settling of logistics issues in EU markets. The domestic market continued to witnessed strong growth in therapies like anti-infective, GI, VMN and Opthal. We remain structurally positive on INDR on account of 1) MR productivity enhancement and higher penetration in North and East markets 2) new launches in US and 3) higher tender business in EU market. This will...

last eight quarters. INDR maintains robust guidance in US generics with growth of 67%/24% in FY22E/FY23E. Its business expansion will drive 25%+ growth in Europe. We note that India formulation sales growth of more than 17% with revenue contribution of 55-60% will have multiplier benefit on sales and headline margins going forward. This along with strong and sustainable growth in US will improve EBITDA margin from 15-16% to 18-20% in FY22E23E. We maintain our positive outlook on INDR as we believe that 1) MR productivity would improve to Rs3lakhs/month (from Rs2.5lakh/month) along with existing field force, 2) India formulations growth to return to more than...

Rs3.1bn for FY23E, with strong India formulations growth. We revise our earnings estimate by downward by 2.6% for FY22E due to tepid performance of acute therapy medicines in IPM given the 2nd wave of pandemic. While, we increased estimates for FY23E by 2.5% in FY23E on back of increase in EUs growth projection. INDR's 3QFY21 revenue and PAT missed our estimates, due to sharper decline in India formulations and API...

Q4 growth was led by strong growth in export markets (albeit on lower base) and lower staff, travel & promotional costs. The management expects 80-90 bps margin improvement in FY22 to ~19%. After going through rough patches in FY18-20, where Indoco faced headwinds on the domestic front (structural issues, pandemic) and exports front (regulatory setbacks), the situation is returning to normalcy. Indoco is expected to post strong FY22 topline growth as domestic sales normalise and grow amid opportunities arising out of post-Covid complications. Export formulations are also...