Hold Indoco Remedies; target of Rs 325: Prabhudas Lilladher

Prabhudas Lilladher's research report on Indoco Remedies

Our FY26/FY27E EPS have been cut sharply to factor in low margins given ongoing remediation cost and lower sales across regulated markets. We downgrade stock to ‘Hold’ from ‘Accumulate’. Indoco Remedies’ (INDR) Q3FY25 EBITDA was much below our estimates due to muted international business and higher expenses. The warning letter issued for both units is expected to restrict growth, particularly in the US market. The company cited other expenses to remain elevated over next two quarters. Our numbers do factor in higher remediation cost till H1FY26.

Outlook

At CMP, the stock is trading at 3.5x EV/domestic sales based on FY26E. We expect 11% PAT CAGR over FY24- 27E. We downgrade stock to ‘Hold’ from ‘Accumulate’ rating with revised TP of Rs325 valuing at 21x FY27E EPS as we roll forward. Timely resolution of Goa facility Unit 2 is a key for re-rating.

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