Motilal Oswal: neutral on Ipca Labs; target of Rs 680

Motilal Oswal's research report on Ipca LabsIPCA’s 3Q PAT at INR232m (54%YoY decline) was significantly below expectations due to sharp revenue disappointment (@INR6.8b, 13% miss) and inventory write of INR240m. EBITDA also declined 26%YoY (22% miss), driven by negative operating leverage and inventory write offs in 3Q. Post 3Q miss, we cut our FY17/18E EPS est. by 14/12% respectively mainly on delay in US FDA resolution and slower ramp up in Institutional business. At CMP, stock trades at 25x/16x FY17E/18E EPS, at a discount to 3 year average P/E. We believe that an earnings rebound (26% EPS CAGR) is largely factored in. However, early resolution of the USFDA-banned facilities could provide further trigger to our estimates. Retain Neutral on IPCA with target price of INR680 (17x FY18E, 20% discount to mid-cap peers).

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