Buy Ipca Laboratories; target of Rs 809: Motilal Oswal

Motilal Oswal's report on Ipca Laboratories

"Post the 2Q miss, we lower the earnings estimates by 20% each for FY15E, FY16E and FY17E. Our estimates assume no sales in the US in FY16 and a partial recovery of USD10m in FY17. Our numbers may hold an upside potential if a) US FDA issues at Ratlam are resolved faster than expected and b) site transfer for key API products comes through, thus restarting formulation supplies to the US. Even if US recovery does not come in FY17, we do not see significant downside to our estimates. We believe IPCA is undergoing a transitory phase and in our view the management is capable of overcoming these challenges. Company’s unique positioning (backward integration capabilities), solid RoE profile (25% maintained over the last four years) and strong execution track record makes the stock very attractive at 17x trailing earnings (most attractive among peers). We maintain a Buy on the stock with a revised target price of INR809 (17x FY17E EPS). Key risk to our view is escalation of current observations at Ratlam/Indore to import alert or warning letter status", says Motilal Oswal research report.

For all recommendations, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More