Ipca Laboratories : Maintain BUY
Call & Research Report by ICICI Securities Research
Report Date: 17 November 2021
CMP Rs. 2121, Target Rs. 2490 ( 17% upside)
Target Period : 2 Quarters
Ipca is a fully integrated pharma company manufacturing over 350 formulations and 80 APIs with exports contributing 50% of revenues in FY21.
Major therapeutic segments include pain management, cardiovascular and
anti-diabetics, anti-infectives, anti-malarials, which together account for 75% of revenues
Revenue break-up FY21 – Formulations:66% (Domestic:37%, Export:29% – Export Generic:15%, Export Institutional:7%, Export Branded:7%),
API:28% (Export API:21%, Domestic API: 7%), Subsidiaries: 5%
Q2FY22 Results: Ipca reported decent Q2FY22 results despite challenges.
Sales were up 13.5% YoY to | 1544.4 crore
EBITDA was at | 365.6 crore, up 1.5%YoY with margins at 23.7%
Consequent PAT was at | 250.2 crore (down 6.3% YoY)
What should investors do? Ipca’s share price has grown by ~4.3x over the past five years (from ~| 488 in June 2016 to ~| 2121 levels in November 2021).
Maintain BUY due to good traction in domestic formulations and sustainable
growth amid some margin pressure in medium term Target Price and Valuation: We value Ipca at | 2490 i.e. 26x P/E on FY23E EPS
Key triggers for future price performance:
Incremental growth in other therapies (excluding malaria), especially noncommunicable diseases like pain management, cardio-diabetology, etc, the overall portfolio is poised for steady growth
Sustained traction from branded and generics exports sales with a revival
in EU is likely to mitigate the US void
Commissioning of Devas plant and additional capacities from Ratlam
US traction will take longer due to USFDA import alerts for the Ratlam facility
that is the only API source for Silvassa and Pithampur formulations