Ipca Laboratories Ltd. share price target

downsides from USFDA. With a very low risk of return per unit in comparison to peers, we maintain BUY' and retain TP Rs1,826 on PE 23x of FY22E earnings. We estimate earnings CAGR 20% over FY20-22E led by a comeback in the UK generic and tender business while maintaining US revenue contribution to remain at the current level. The positive outcome from...

25 February 2020 IPCA remains confident that it will outperform industry with 14-15% CAGR in DF segment over the next three years. The plan to add 250-300 MRs over the next 6-9 months emphasizes its incessant focus on this segment. Pain management prospects appear particularly promising, with IPCA comfortably surpassing industry growth (8-10%) with a CAGR of 17% over FY14-19 and 20% growth in 9MFY20. IPCA plans to add two more SKUs in pain management in FY21. The Zerodol group of brands has reached a revenue size of ~INR4b with potential to double over 3-4 years. Another promising product is chlorthalidone and its combination, which has reached a revenue size of INR1b in the past four years with attractive medium- term potential. IPCA delivered strong 33% YoY growth in API segment in 9MFY20, led by robust off-take in existing molecules and addition of new molecules (Sartans).

Growth in exports formulations (28% of FY19 revenue) was on the back of growth in both international generics and international branded formulations. The international anti-malarial institutional business has also contributed substantially to overall exports growth. US traction will take more time than earlier estimated due to USFDA import alerts for the Ratlam facility that is the only API source for Silvassa and Pithampur formulations plants along with Silvassa and Pithampur (Indore) plants that are specifically earmarked for US business, besides third party sales. However, sustained...

EBITDA margin guided to improve by 100-150 bps YoY in FY21E and FY22E due to the benefits of operating leverage, re-entry in UK generics, traction in branded generics and strong demand of high value APIs. We expect Global Fund business may shift some of its sales to FY21E. IPCA trades at PER of 21.6x (FY21E) and 18x (FY22E). We have increased our earnings estimate by 34% (FY21E) and 40% (FY22E) and increased our PE multiple to 23.3x(earlier 22x)due to better visibility in tender business, generic export and reduction in effective tax rate.We have upgraded the stock to BUY' from Accumulate...

13 February 2020 IPCA is one of the companies with high exposure to domestic formulation (DF; 40% of sales), a favorable opportunity in API (23% of sales) and better traction in international generics. We raise our EPS estimate by 10%/10.5%/11.4% for FY20/21/22 and also growth in DF, a revival in int. generics and sustained momentum in API. strong growth in exports (generics) and API. Exports (generics) grew 39% YoY to INR2b (16% of sales), API sales were up 24% YoY at INR3b (23% of sales), while DF sales increased 15% YoY to INR4.9b (40% of sales). Exports (branded + institutional) grew 12% YoY to INR1.6b (13% of sales). Gross margin shrank 120bp YoY to 65.1% due to a change in product mix (higher share of API sales). EBITDA margin contracted 70bp YoY due to a lower gross margin and higher employee cost (+60bp YoY), offsetting the benefit of lower other expenses (- 120bp YoY).

Ipca Laboratories Ltd is a fully-integrated Indian pharmaceutical company manufacturing over 350 formulations and 80 APIs for various therapeutic segments. It is one of the world's largest manufacturers and suppliers of over a dozen APIs. These are produced right from the basic stage at manufacturing facilities endorsed by the world's most...

Ipca Laboratories Limited (Ipca) reported impressive results for Q2FY2020. Numbers were ahead of estimates. Aided by a strong double-digit growth across the formulations and API business, topline was up 29% y-oy to Rs 1284 crore. On the back of improved product mix and favorable raw material prices, operating profit jumped 52.5% y-o-y to Rs 263.5 cr while the adjusted PAT rose 62% y-o-y to Rs 193.5 cr. Expected traction across the formulation and API business, improved product mix and a substantial drop in the remedial cost are expected to...

Exports formulations (28% of FY19 revenue) grew on the back of growth in both international generics and international branded formulations. The international anti-malarial institutional business has also contributed substantially to overall exports growth. US traction will take more time than earlier estimated due to USFDA import alerts for the Ratlam facility that is the only API source for Silvassa and Pithampur formulations plants along with Silvassa and Pithampur (Indore) plants that are specifically earmarked for the US business, besides third party sales. However, a likely recovery...

Healthy revenue growth across segments, except institutional anti-malaria business: Sales at INR10.8b (v/s est. INR9.6b) were up 23% YoY, led by API and exports (formulation). API grew 37% YoY to INR3b (30% of sales). Generics' exports grew 21% YoY to INR1.3b (13% of sales). Branded exports grew 17% YoY to INR916m (9% of sales). Domestic formulation sales grew 13% YoY to INR4.5b (46% of sales). Overall growth was dragged to some extent by 34% YoY decline in the Institutional (INR273m) segment. Better operating leverage offsets reduction in gross margins: Gross margins...

Q1FY20 from its average contribution of 25%. This has resulted in higher material costs and lower gross margin by 360bps QoQ. Management guided that normalized gross margin will return from Q2FY20E onwards. The higher material costs also contributed from the higher price of material by 100bps out of 360bps in Q1FY20. IPCA is global leader in losartan production (Rs1.2bn sales in FY19) and its valsartan sales is improving from current run rate of Rs25m/month. It guided more than 20% growth in API sales in FY20E....