Hold Ipca Labs; target of Rs 441: Sushil Finance

Sushil Finance has recommended hold rating on Ipca Labs with a target of Rs 441, in its August 07, 2010 research report.

“Ipca Labs has come out with strong set of domestic numbers in Q1FY13 however; export formulations grew by only 8.7% since UK & Russia business were impacted to the extent of Rs. 350-450 mn due to the implementation of Track & Trace system. The company on the revenue front has registered a growth of 19.7% to Rs. 6344 mn with PAT registering a de-growth of 30.3% to Rs. 429.8 mn mainly on the back of a forex loss of Rs. 588.5 mn as against a forex gain of Rs. 91 mn in Q1FY12.”

“Revenues grew by 19.7% YoY from Rs. 5299 mn in Q1FY12 to Rs. 6344 mn in Q1FY13. The company’s domestic business including APIs which contributes ~42% to the sales of the company registered a strong growth of 14.7% whereas the export business including APIs registered a strong growth of 23.6%.  On the domestic formulations front, of the total 12 marketing divisions, 8 witnessed double digit growth (Rheumatoid arthritis, Pain, CVS, Cough & cold etc.) while other 4 divisions are still struggling for growth. It recording a 18.6% growth from Rs. 1890 mn in Q1FY12 to Rs. 2242 mn in Q1FY13 mainly on account of 19% growth in Pain management, 30% in cough & cold, 20% in Rheumatoid Arthritis & 14% in CVS segment.  Export formulations increased to Rs. 2245 mn in Q1FY13 from Rs. 2066 mn in Q1FY12 mainly on the back of a 12.6% growth in its institutional business, 6.9% growth in its generic portfolio and branded portfolio recorded a growth of 8.5%.”

“On the Generics side, formulations grew on the back of a 14% growth in the US market and approximately 34% growth in the Australia/NZL region combined whereas Europe witnessed a flattish trend. On the Branded side, markets such as LatAm (100% YoY growth), Asia (62% YoY growth) & W Africa (15% YoY growth) recorded good growth whereas CIS witnessed revenue decline of 34% majorly from delay in shipment due to the implementation of the Track & Trace system.”

“With the domestic formulation business reporting strong growth for the second quarter running, US business expected to receive a considerable boost by the USFDA approval for the Indore SEZ and strong traction in its institutional business (expected to garner Rs. 3600 mn in FY13E + Artesunate Amodiaquine approval expected to generate revenues from Q4FY13E); we maintain our positive view on the stock. Also with the de-growth witnessed in Russia being a one time phenomenon, we believe Ipca’s branded generics business will also add to the growth in a big way in FY14E. We thereby recommend a HOLD on the stock with a TP of Rs. 441 (14x its FY14E EPS of Rs. 31.5),” says Sushil Finance research report. 

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