Accumulate IPCA Laboratories; target of Rs 1600: Dolat Capital

Dolat Capital's research report on IPCA Laboratories

Vinati Organics Q4FY20 sales were below our estimates to Rs 2.45bn (D.est: Rs 2.75bn), sales de-grew by 17.3% YoY and were up 2.9% sequentially. The de-growth in sales YoY is largely attributed to de-growth in ATBS and IBB volumes. Gross margins improved by 442bps YoY and 509bps QoQ on account of benign RM costs. EBITDA/PAT degrew by 15.1/9.6% YoY to Rs 1.0bn/Rs 746mn respectively. Employee costs were up 21.9% YoY to Rs159 mn, a higher other income up by 57.8% YoY to Rs 162mn and a lower tax rate of 31% against 33% in 4QFY19 shielded PAT to Rs 746mn.

Outlook

We continue to be positive on the stock, however due to prevailing rich valuations we maintain accumulate rating with a target price of Rs 1,066/share.

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