Hold Ipca Laboratories; target of Rs 2393: Prabhudas Lilladher
Prabhudas Lilladher recommended Hold rating on Ipca Laboratories with a target price of Rs 2393 in its research report dated November 10, 2020.
November 12, 2020 / 04:02 PM IST
Prabhudas Lilladher's research report on Ipca Laboratories
We increase our estimate by 13%/6%/1% for FY21/22/23E with discounting management guidance of sustainable EBITDAM 25%-28% (v/s 20% in FY20) from here onwards. We however rationalize the guidance and factor Adj.EBITDAM of 30%/23.2%/23.6% for FY21/22/23E as we believe part of fixed (marketing/SGA) and R&D costs would return to pre-COVID level with MRs back to field visits. The 2QFY21 earnings beat was primarily led by higher EBITDAM at 28% v/s our estimate of 24%. IPCA reaffirmed its growth guidance for FY22-23E with 1) India formulation back at 10-12%, 2) API at 12- 14% led by new capacity, 3) Export generics at 15%-16% with all regions contributing to growth and 4) Strong order book from institutional clients based on new products approval (injectable and DT drugs). Despite factoring multiple growth levers, IPCA’s valuation is at discomfort as it trades at 26x PE of FY23E.
We roll over our valuation to FY23E (earlier FY22E) and derive at new TP of Rs2,393 (earlier Rs1,886) based on 27x (Unchanged) PE of FY23E EPS of Rs89. We maintain Hold(Unchanged).
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