Indoco Remedies Ltd. share price target

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...

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...

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...

IPM is struggling for growth above 10% even after MoM abating COVID concerns and with MRs, physician activities almost reaching pre-COVID level. We believe key reasons for growth below par are (i) subdued new prescription (Rx) leading to volume de-growth (ii) digital marketing yield going south and (iii) sustained lower demand of acute products. Cardiac and anti-diabetic growth takes a breather in Jan-21 at 8.8% and 5.3% after reporting double digit growth in most months during lockdown. While amongst top therapies Gastro and VMN reported double digit growth of 14%...

H1 growth was led by strong growth in export markets (albeit on lower base), strong gross margins and lower travel & promotional spends. The management has guided for significant export growth and margin improvement for FY21. After going through rough patches in FY18-19, where Indoco faced headwinds on the domestic front (structural issues) and exports front (regulatory setbacks), the situation is returning to normalcy. While FY21 growth in the domestic market is likely to be subdued due to Covid-19, exports are likely to deliver robust growth on the back of strong...

Valuation and Risks: We upgrade our Revenues for FY21E/FY22E by 0.9%/0.7% to Rs. 13.3 Bn / Rs. 16.8 Bn due to upgrade in US markets.

India formulations growth core to overall growth Domestic formulations (~63% of FY20 revenues) grew at 6.5% CAGR in FY16-20. The subdued growth can be attributed to high concentration of acute therapies and one of the lowest MR productivity. With a market share of ~0.7% and overall rank of 29, the company is still a marginal player with some top brands in smaller categories like stomatologicals. However, with a positive outcome of restructuring exercise and likely improvement in MR productivity besides therapy calibration, we expect Indian formulations to...

1QFY21 earnings were mixed with revenue lower than our estimate but EBITDA and PAT higher due to higher gross margin and lower SG&A.; INDR's key growth driver for FY22E India formulation declined by 9% (55% of revenue) YoY even after restructuring its marketing divisions and sales team with new taxonomy of portfolio, focus and allotment of MRs (including additional headcounts). Europe has already made a strong comeback with...

Decent Revenue Traction:Indoco Remedies (Indoco) revenues increased by 7.9% on a YoY basis to Rs. 2.72 bn due to domestic formulations and US.