Accumulate Ipca Laboratories; target Rs 485: Angel Broking

Angel Broking is bullish on Ipca Laboratories (Ipca) and has recommended accumulate rating on the stock with a target price of Rs 485 in its October 26, 2012 research report.

"Ipca Laboratories (Ipca) reported higher than expected results on the net profit front (For 2QFY2013), while the sales came in just in line with expectations. The topline grew by 22.6% yoy to Rs 758cr, just in line with our expectations of Rs 740cr. The OPM also came in line with expectations at 21.8% vs an expected 21.9%. However, in spite of the same, the adjusted net profit growth came in at 60.5% yoy, ending the period at Rs 125cr vs our expectation of Rs 107cr, on the back of higher other income.

Ipca reported net sales of Rs 758cr, up 22.6% yoy, just in line with our expectation of Rs 740cr. The OPM also came in line with expectation at 21.8% (21.9%). Recurring profit came in at Rs 125cr, higher than our estimate of Rs 107cr, on the back of higher other income (Rs 29.3cr vs Rs 8.1cr in 2QFY2012). Segment wise, for 2QFY2013, the overall formulations business grew by 23% to Rs 602cr (Rs 490cr), contributing 79.5% to the company’s total revenue. The API business witnessed a strong 21% growth during the quarter to Rs 156cr, contributing 20.5% to the total revenue. The adjusted net profit for the quarter grew by 60.5% yoy to Rs 125cr.

We expect net sales to post a 21.4% CAGR to Rs 3,474cr and EPS to register a 30.6% CAGR to Rs 37.3 over FY2012–14E, driven by the US and domestic markets and the active pharmaceutical ingredient (API) segment. At the current levels, the stock is trading at 15.0x and 12.0x FY2013E and FY2014E earnings, respectively. We recommend an Accumulate rating on the stock with a price target of Rs 485," says Angel Broking research report.

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