Buy Ipca Labs; target of Rs 523: Motilal Oswal

Motilal Oswal is bullish on Ipca Labs and has recommended buy rating on the stock with a target of Rs 523 in its August 2, 2012 research report.

“IPCA's 1QFY13 performance was below our expectations. Revenue grew 19.7% YoY to INR6.34b (v/s our estimate of INR6.41b), EBITDA grew 39.7% YoY to INR1.33b (v/s our estimate of INR1.41b) and PAT was INR430m (v/s our estimate of INR469m). The international API business grew 58% YoY to INR1.42b, primarily led by the merger of Tonira Pharma, commercialization of new facilities and favorable currency movement. The international formulations business reported muted growth of 8.7% YoY to INR2.24b, as certain shipments (worth INR600m) in the institutional business and other business got deferred to 2QFY13. EBITDA grew 39.7% YoY to INR1.33b; EBITDA margin expanded 300bp YoY to 21% (below our estimate of 21.9%). Adjusted PAT declined 30.3% YoY to INR430m despite strong operating performance due to INR588m of forex losses.”

“Strong growth traction in exports coupled with growth recovery in the domestic formulations business will be the key triggers for IPCA over the next two years. Post the 1QFY13 results, our estimates remain largely unchanged. We expect IPCA to clock EPS CAGR of 30% over FY12-14 on the back of 17% revenue CAGR, coupled with 100bp EBITDA margin expansion and reversal of MTM forex losses. Return ratios continue to be strong, with RoCE of ~28% and RoE of 27%, which is reflective of the conservative management strategy and efficient capital allocation. The stock currently trades at 13.3x FY13E EPS and 11x FY14E EPS. Reiterate Buy with a target price of INR523 (14x FY14E EPS),” says Motilal Oswal research report.

Institutional holding more than 40% in Indian cos

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