Buy Ipca Laboratories; target of Rs 2420: Motilal Oswal

Motilal Oswal is bullish on Ipca Laboratories recommended buy rating on the stock with a target price of Rs 2420 in its research report dated August 11, 2020.

Broker Research

August 13, 2020 / 15:02 IST

Motilal Oswal 's research report on Ipca Laboratories

Ipca Laboratories (IPCA) delivered a phenomenal performance, with unprecedented high sales/EBITDA/PAT for the quarter. This was led by Export Formulations and Domestic APIs. COVID-19-led demand for Hydroxychloroquine Sulfate (HCQS) sustained the momentum in API, and the spillover of some business QoQ aided 3x YoY PAT for 1QFY21. - We raise our EPS estimate by 36%/15% for FY21/FY22 to factor: (a) HCQS-led opportunity, (b) an improving outlook / reduced opex for Domestic Formulations (DF), and (c) lower raw material cost. We further raise the PE multiple to 25x (in line with the five-year average) from 23x earlier to factor IPCA's capability to: (a) grow better than the industry in DF and (b) benefit from supply disruption in the API industry and increased backward integration driving better gross margins.

Outlook

Accordingly, we revise our TP to INR2,420 (from INR1,955 earlier) and reiterate Buy on the stock.

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