Motilal Oswal's research report on IPCA Laboratories
The acquisition would enable IPCA’s re-entry into the US generics market and aid synergy through cross-selling the portfolio in the export market. However, we believe that increased competition in the oral solids US generics market and no USFDA inspections at Unichem sites since Feb’20 put the outlook for the US generics business at risk. We cut our FY24/FY25 EPS estimates by 11.7%/5% to factor in the Unichem acquisition and a subsequent reduction in other income.
Outlook
We also reduce the PE multiple to 21x (from 24x) due to the utilization of capital toward the high-gestation/low-return generics business and expensive valuations. Accordingly, we arrive at a TP of INR760. We downgrade IPCA to Neutral on limited upside from current levels.
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