Buy Ipca Laboratories; target of Rs 1350: Sharekhan

Sharekhan's research report on Ipca Laboratories

Ipca’s Q4FY2024 performance was above our estimates. Sales grew 43.6% y-o-y to Rs. 2,020 crore, EBITDA increased 44.7% y-o-y to Rs. 321 crore, and APAT rose 110% y-o-y to Rs. 165 crore. Segment-wise growth was seen across regions, where domestic branded formulation surpassed IPM growth, generic grew 15%, and institution grew 8%.Healthy product mix, raw-material cost rationalisation, and Unichem’s profitability led to 550bps y-o-y growth in gross margin to 66%; subsequently, EBITDA margin increased 322bps y-o-y to 15.8%.

Outlook

Ipca’s UniChem business has reported healthy turnaround and resurgence of U.S. sales is expected to increase EBITDA margin to 21.5% by FY2026; hence, we upgrade our rating to BUY. Currently, the stock is trading at ~31.5x/24.9x its FY2025E/FY2026E EPS and we ascribe a P/E of 27x to arrive at a PT of Rs. 1,350.