Sharekhan's research report on Ipca Laboratories
IPCA labs reported a weak performance for Q4FY2020. Revenues grew 22% yoy to 1073.8 cr aided by a strong growth in both API and formulations segments. OPM’s contracted due to higher employee cost and other expenses. PAT at Rs 86 cr decline 12.8% and missed estimates. IPCA expects both – API and formulations business to grow at a healthy pace and has guided for a 14-17% topline growth and 100-150 BPS margin expansion. Favorable mix, operating leverage and stable input prices to drive OPM expansion. IPCA’s Sales and PAT are expected to grow by 16% and 31% CAGR over FY2020-FY2022. Strong earnings prospects, a sturdy balance sheet and healthy return ratios augur well for IPCA.
Outlook
We retain Buy recommendation with an unchanged PT of Rs 1750. Resolution of USFDA issues at the Pithampur and Pipariya plant is critical and upon successful resolution can lead to earnings upgrades.
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