Ipca Laboratories Ltd. share price target

Ipca Laboratories Limited (Ipca) reported strong performance during the quarter. Sales for the quarter grew strongly by 23.2% y-o-y to Rs. 1,078 crore (16.9% above our estimate). Operating profit grew by 44.9% y-o-y to Rs. 207.9 crore (9.4% above our estimate). OPM improved by 289 BPS y-o-y to 19.3% (130 BPS below our estimate of 20.3%). Adjusted PAT reported growth of 50.4% y-o-y to Rs. 140.2 crore (16.8% above our estimate). Reported profit for the quarter grew by 88.1% y-o-y to Rs. 129.4 crore. Strong growth across domestic and exports (Formulation...

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, a likely...

Margin improvement due to product mix and lower overheads: In Q4FY19, total revenues of IPCA Labs increased by 7%YoY to Rs 8338 mn (our estimates Rs 8706 mn) mainly due to increase in domestic formulations and API.

Gross margin expanded 45bp YoY to 68% due to a better product mix. Reduced remediation cost (INR40m v/s INR100m in 4QFY18) and better operating leverage led to lower other expenses (-520bp YoY). As a result, EBITDA margin expanded at an even higher rate of 590bp YoY to 20.9% (our estimate: 17.4%). EBITDA was up 49% YoY at INR1.7b (our estimate: INR1.5b), while PAT increased 71% YoY to INR1b (our estimate: INR873m)....

Ipca's major customer. The regulatory hurdle at distributor's end is now resolved and hence we expect this business to pick up gradually. Also, Ipca has been re-selected as the panel supplier for anti-malarial medicines to the global fund pooled procurement mechanism and for private sector co-payment mechanisms for an initial period of three years in FY19. Thus, the exports...

Sustained outperformance in branded domestic formulation (DF) space coupled with enhanced opportunities in the API segment and additional business from institutional Anti-Malaria segment shows that IPCA has enough headroom to be on a strong earnings trajectory over the next 2-3 years

We met IPCA management, who charted out its vision to achieve a resolution Change in Estimates | Target | Reco with USFDA and turn around its business verticals which had faced challenges since CY15. IPCA's institutional tender business for anti-malaria...

Margin improvement due to product mix and lower overheads due to forex: In Q3FY19, total revenues of IPCA Labs increased by 10.2%YoY to Rs 9476 mn(our estimates Rs 10450 mn) mainly due to increase in export formulationsand API.

ICICI Securities Ltd | Retail Equity Research Q3FY19 results were a comprehensive beat vis-a-vis I-direct estimates on the profitability front due to strong EBITDA margins (24.5% vs. I-direct estimate of 17.7%). Revenues grew 10.3% YoY to | 947.6 crore (I-direct estimate: | 939.1 crore) due to 10% growth in domestic formulations to | 421.6 crore EBITDA margins improved 569 bps YoY to 24.5% (I-direct estimate: 17.7%) due forex gain, strong gross margins and lower employee...

ICICI Securities Ltd | Retail Equity Research Q2FY19 results were higher than I-direct estimates on all fronts. Revenues grew 15.4% YoY to | 997.8 crore (I-direct estimate: | 950.5 crore) due to 23.2% growth in export formulations to | 288.3 crore (Idirect estimate: | 282.9 crore). Domestic formulations grew 10.3% YoY to | 468.6 crore (I-direct estimate: | 446.0 crore) EBITDA margins remained at ~17% but came in higher then I-direct estimates of 15.5% mainly due to a strong gross margin performance. EBITDA grew 15.9% YoY to | 172.8 crore...