Hold IPCA Laboratories; target of Rs 1060: Emkay Global Financial

Emkay Global Financial's report on IPCA Laboratories

We maintain our Hold rating on Ipca with a revised TP of Rs1,060, as we await more clarity on input cost trends and the revenue growth trajectory. We lower FY22E EPS by ~5% to reflect the Q3 miss. We also trim FY23E/FY24E EPS by ~4%/3%. Q3 revenue, EBITDA and PAT missed our estimates by 3%, 10%, and 21%, respectively. The miss was driven by lower-than-expected export revenues and higher raw material costs, along with higher power, fuel and logistics costs. Ipca has guided for 20% revenue growth on a standalone basis in Q4. It expects UK and API businesses to remain subdued and the institutional business to post solid qoq growth. Gross margins are expected to remain stable in Q4, while seasonally lower domestic revenues are likely to impact operating profitability. Management will provide the FY23 outlook in Q4.

Outlook

We reduce our TP to Rs1,060 from Rs1,120 earlier, which implies a 21x P/E on FY24E EPS. Upside risks: better-than-expected export growth, resolution of US FDA import alert and a decline in raw material prices. Downside risks: lower-than-expected growth and slowdown in IPM.

More Info

At 17:30 Ipca Laboratories was quoting at Rs 980.30, down Rs 8.90, or 0.90 percent.

It has touched an intraday high of Rs 1,001.45 and an intraday low of Rs 972.05.

It was trading with volumes of 11,675 shares, compared to its thirty day average of 30,872 shares, a decrease of -62.18 percent.

In the previous trading session, the share closed up 2.54 percent or Rs 24.50 at Rs 989.20.

The share touched its 52-week high Rs 1,383.55 and 52-week low Rs 893.03 on 15 September, 2021 and 23 February, 2021, respectively.

Currently, it is trading 29.23 percent below its 52-week high and 9.64 percent above its 52-week low.

Market capitalisation stands at Rs 24,870.62 crore.

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