Ipca Laboratories may test Rs 900, says Mayuresh Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "Ipca Laboratories - I think the underperformance has been evident because of the FDA ban on three of its plants and again only 4 APIs allowed which account at almost 45 percent of the sales. Having said that, probably I think do we expect a recovery to probably come through in FY16, quite unlikely but then roll it over to FY17 and let us see how the numbers stack up.""I think if you go by the trend that the company is posting right now, the management really expects second half of FY16 to be driven by 7-8 percent rise in institutional sales. So, you get a lot of these HCQ supplies coming through and that is probably a very conservative approach or an estimate that we are probably estimating specifically on institutional sales business.""Secondly, I think if you look at the mix per se the management on the domestic formulations business which is the cash cow for the company has basically turned away from the anti-malarial segment and they are focusing more on the high margin, high chronic lifestyle segments like CNS, CBS, diabetic, dermatology and clearly these segments pose high margins. So, clearly I think we are expecting margins to shoot up by FY17 to 18.6 percent.""What effectively this means is that with lower costs coming through with sales improving, with high margin orders coming through and again assuming that nothing happens probably on the FDA front in terms of approvals coming through, the profitability from FY16 which we expect to come to close to around Rs 169-170 crore odd, that might see a jump close to Rs 350 crore odd with margins actually jumping to around 18.6 percent," he added."I think if some resolution happens over the next few quarters on a few of its plants, the kind of RoE expansion that one might probably see in the stock can be quite tremendous. So, clearly I think valuations looking attractive, even if you go by the current run rate I think we are still expecting good numbers to come through in FY17. So, one can look at declines with a target of Rs 900," he said.