UBS has downgraded pharmaceutical firm Ipca Laboratories from buy to neutral as it believes the potential earnings growth recovery in FY18/19 is largely priced in at current levels.
The stock has outperformed the Nifty and NSE Pharma indices by 5 percent and 16 percent, respectively, over the past three months, based on investors' expectations of an early resolution to import alerts, according to the research house.
However, UBS expects the resolution of import alerts to materialise in early 2018, given the risk-based inspection mechanism followed by the US FDA and resumption in the US business by H2FY19.
Remediation at the two formulation facilities under import alert is complete and management guides for completion of remediation work at the API site by July 2017.
Further, given high price erosion in hydroxychloroquine, UBS believes US revenue could continue to be under pressure.
Ipca's UK business (12 percent of net sales for 9MFY17) also continues to be impacted due to Brexit and a weaker sterling translating to lower rupee realisations.
At 15:24 hours IST, the stock was quoting at Rs 617.00, down Rs 15.45, or 2.44 percent on the BSE.
Posted by Sunil Shankar Matkar
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