Buy Ipca Laboratories; target of Rs 829: Prabhudas Lilladher

Prabhudas Lilladher's research report on Ipca Laboratories

IPCA's sales, adj. EBITDA and PAT beat estimates by 6%, 17%, and 30% on the back of strong recovery of generic sales in non-US markets. The exports non-US generics grew by 33% YoY and additional sales are mainly contributed by EU sales and Australia/New Zealand. Its UK sales remain tepid as its partner's (Bristol Lab) resolution with UK MHRA is expected to be achieved in H1FY20E. Depreciation Rouble continued to impact branded business in Russia as IPCA billed the export in the country in USD denomination. IPCA expects 10% growth export branded formulations in FY19E as lower oil price to improve realisation in H2FY19E. India business grew 10% YoY and guided to be 16-17% in FY19E. The additional data filing on the three plants to be completed in December CY18 and expects USFDA visit in by June CY19. Tender business to be Rs1.8-1.9bn in FY19E, implies 14% YoY growth in the absence of business from the Global Fund. Management expects new approvals of DT and Injectable to boost its anti-malaria tender business (without contribution from the Global Fund) in FY20E.

Outlook

We expect key fundamentals to improve gradually and set-off for bigger momentum once FDA issues resolves. IPCA trades at PER of 27x (FY19E) and 19x (FY20E). We maintain 'Buy' and retain TP at Rs829.