Upbeat on IPCA; buy stock on domestic growth: Nomura

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26 Aug, 2025 12:21

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Moneycontrol BureauNomura upgrades IPCA to buy with a target price of Rs 563 as it believes that the negatives have been priced in for the pharma company. It also revises the earnings estimates and current valuations. The brokerage firm believes that the risk reward is favourable at current valuations. The company can sustain low-to-mid-teens growth in the domestic market, says the report. The ruling in favour of IPCA's largest combination product is a positive for the company, it adds.But the brokerage house doesn't see any revival in the company's US and institutional business due to US FDA issues which are likely to remain unresolved in the next two years.Having priced in the negatives, Nomura has lowered FY17 forecast earnings-per-share (EPS) by 41 percent as it forecasts a cut of 8 percent in sales. It marks down EPS by 52 percent due to the 13 percent cut in sales for FY18.Given significant revenue cost mismatch, earnings have been affected, notes the brokerage firm. The firm values IPCA's domestic business at 3.5 times enterprise-value-to-sales (EV/sales) and the rest at 1.5 times EV/sales. Nomura sees an upside of 23 percent.Since December last year, the stock price has corrected by 42 percent. The development comes on the back of the market expectations of an earnings growth on the back of a pick-up in antimalarial drug supply to the Global Fund and higher realisation from hydroxychloroquine (HCQS) pills failed to materialise.