Buy IPCA Laboratories; target of Rs 1980: Motilal Oswal

Motilal Oswal's research report on IPCA Laboratories

Following a muted performance in the US over the past eight years due to compliance issues, IPCA is well-poised to revive its US business through new product launches, relaunches, stable pricing in its base business, and the integration of the Unichem business over the next 12-24M. Further, its (ex-US) business is in a strong position, with a better outlook driven by enhanced offerings in the export markets such as Australia, New Zealand, and Europe (EU) by adding Unichem’s products to the existing portfolio. With the top 10 therapies experiencing double-digit growth over MAT Nov’20-24, IPCA is focusing on launching new divisions in the fast-growing therapies such as cosmetodermatology and orthopedics. Additionally, the company is working towards creating new divisions and adding 500-700 MRs, as well as improving its MR productivity. Considering a 27% earnings CAGR and an anticipated improvement in the return ratio to ~16% over FY24-27, we value IPCA at 36x 12M forward earnings to arrive at our TP of INR1,980. We reiterate our BUY rating on IPCA as we factor in better operational efficiency, a revival in the US business, synergies from the Unichem acquisition, and a well-established DF business.

Outlook

We value the stock at 36x 12M forward earnings to arrive at our TP of INR1,980. We reiterate our BUY rating on the stock.