Buy Ipca Laboratories, target of Rs 965: Emkay

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Buy Ipca Laboratories, target of Rs 965: Emkay

Emkay Research has maintained its buy rating on Ipca Laboratories with a price target of Rs 965. Ipca’s FY08 revenues grew by 16% to Rs 10.9 billion, in line with research firm's expectation.

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Emkay Research has maintained its buy rating on Ipca Laboratories with a price target of Rs 965 in its June 2, 2008 research report. "Ipca's FY08 revenues grew by 16% to Rs 10.9 billion, in line with our expectation. The increase in revenues is largely driven by 25% growth in export formulations and 20% growth in domestic formulation business. Overall exports grew by 11%, however in Q4FY08, exports grew by only 2% to Rs 1470 million versus Rs 1440 million in Q4FY07. The lower growth in export is primarily because of fire in its Athal formulation manufacturing unit in the month of February, which has impacted revenue of Rs 150 million in Q4FY08 and thus margins of the company. Appreciation in currency (12% over FY07) coupled with lost of export revenues and 100 bps increases in employee cost impacted EBIDTA margins by 90 bps to 20.6%."

"PAT grew by 9% to Rs 1.36 billion in FY08. Lower growth in PAT was on the back of loss in associates companies (Rs 39.3 million in FY08 versus Rs 1.2 million profit in FY07) because of increased filing cost in the regulated markets and loss of export revenues in Q4FY08. Diluted EPS for FY08 stood at Rs 54.2 (up by 9% over corresponding period). Mangement has given strong outlook for FY09E with revenue guidance of 18% and EBIDTA margins in the range of 22%. At CMP of Rs 599, the stock is trading at 8.6x FY09E and 7.3x FY10E earnings. We maintain our BUY rating with a price target of Rs 965 based on 12x FY10E EPS of Rs 81.6. Key risk to our call remains the currency appreciation," says Emkay's research report.

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