Motilal Oswal's research report on Ipca Laboratories
Ipca Laboratories (IPCA)’s 4QFY21 performance was below expectations, weighed by moderation in the Domestic Formulation (DF) segment and API sales. However, IPCA remains on track to deliver healthy mid-teen YoY growth in the Branded Generics segment. Increased business share from the integrated manufacturing value chain and better operating leverage in DF would drive improvement in profitability going forward – adjusted for one-time business from Hydroxychloroquine Sulfate (HCQS) in FY21. We lower our EPS estimate by 5%/2% for FY22/FY23E, reflecting a) sales growth constraints in the API/Generics segment and b) an increase in marketing and promotional cost with the easing of lockdown-related measures in the Branded Generics segment. We continue to value IPCA on 24x 12M forward earnings to arrive at TP of INR2,400. We remain positive on the stock owing to a) its outperformance of the industry in the DF segment, b) increasing cost efficiency on better backward integration, and c) its capacity enhancement program for the API business. Maintain Buy.
Outlook
We continue to value IPCA on a 24x 12M forward earnings basis to arrive at TP of INR2,400. - We remain positive on IPCA on the back of a) its outperformance of the industry in the DF/Branded export segment, b) better profitability on improving manufacturing efficiency, and c) capacity expansion in the API segment. Reiterate Buy.
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