Buy Ipca Laboratories; target of Rs 559: Angel Broking

Angel Broking is bullish on Ipca Laboratories and has recommended buy rating on the stock with a target of Rs 559 in its January 30, 2013 research report.
 
“For 3QFY2013, Ipca Laboratories (Ipca) reported a good set of numbers, although they are a lad lower than our expectations. The top-line grew by 15.1% yoy to Rs692cr, lower than our expectation of Rs740cr. The OPM came in line with our expectation at 21.6% vs 16.4% in 3QFY2012. However, the same was not reflected in the net profit growth on account of a high rise in interest expenses. The net profit rose 36.3% yoy to Rs88cr vs our expectation of Rs107cr. We revise our target to Rs559 and recommend Buy on the stock.”
 
“Ipca reported net sales of Rs692cr, up 15.1% yoy, lower than our expectation of Rs740cr. The OPM came in line with our expectation at 21.6% (we had estimated it at 21.5%). Recurring profit came in at Rs88cr, lower than our estimate of Rs107cr, on back of higher interest expenses (Rs26cr vs Rs11cr in 2QFY2012). Segment wise, for 3QFY2013, the overall formulations business grew by 11.0% to Rs530cr, contributing 76.6% to the company’s total revenue. The API business witnessed a strong 30% growth during the quarter to Rs162cr, contributing 23.4% to the total revenue. Net profit for the quarter grew by 36.3% yoy to Rs88cr.”
 
“We expect net sales to post a 21.4% CAGR to Rs3,474cr and EPS to register a 30.6% CAGR to Rs37.3 over FY2012–14E, driven by the US and domestic markets and the API segment. At current levels, the stock is trading at 16.3x and 13.1x FY2013E and FY2014E earnings, respectively. We recommend a Buy on the stock with a target price of Rs559,” says Angel Broking research report.

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