Buy Indoco Remedies; target of Rs 358: Prabhudas Lilladher

Prabhudas Lilladher's research report on Indoco Remedies

We reduce our earnings estimate by 7% for FY21E due to tepid performance of acute therapy medicines in IPM, while increase earnings estimate by 3%/2% for FY22/23E given revision in EU growth projection. 3QFY21 revenue were in-line with our estimate based on growth led by export formulations while EBITDAM beat of 90bps due to operating leverage through cost saving program. We maintain our positive outlook on INDR and believe 1) MR productivity would improve to Rs3lakhs/month (from Rs2.5lakh/month) with similar headcounts of field force, 2) India formulations growth to return to 10- 12% from FY22, 3) US launch of ophthalmic and oral ANDAs in partnerships and 4) lower remediation cost as regulatory issue is resolved. INDR had sizeable capex in FY18-20, but its growth suffered due to regulatory issues. With guidance of limited CAPEX, unutilized capacity especially for US and EU markets, resolved regulatory issues and restructured sales force, INDR is poised to grow on better contributions from two key markets, US and India.

Outlook

We maintain Buy and increase our TP to Rs358 (earlier Rs352) based on 18x (unchanged) PE of FY23E EPS of Rs20.

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