Buy Ipca Laboratories; target of Rs 1826: Prabhudas Lilladher

February 20
16:24 2020

Prabhudas Lilladher’s research report on Ipca Laboratories

IPCA reported strong Q3FY20 earning with Revenue, EBITDA, and PAT increasing by 20%, 15%, and 23% YoY to Rs11.4bn (PLe 11.9bn), Rs2.7 (PLe 2.7bn), and Rs1.9bn (PLe 1.9bn). Its 85% of formulations are integrated with captive APIs while only top 8-10 APIs are integrated with key ingredients. With inventory of ingredients/API till April, management guided that manufacturing of pharma chemicals need to be normalised in China by mid-March. The delay beyound mid-March will impact productions of key APIs and formulations in IPCA. EBITDA margin guided to improve by 100-150 bps YoY in FY21E and FY22E due to the benefits of operating leverage, re-entry in UK generics, traction in branded generics and strong demand of high value APIs. We expect Global Fund business may shift some of its sales to FY21E. IPCA trades at PER of 21.6x (FY21E) and 18x (FY22E). We have increased our earnings estimate by 34% (FY21E) and 40% (FY22E) and increased our PE multiple to 23.3x(earlier 22x)due to better visibility in tender business, generic export and reduction in effective tax rate.


We have upgraded the stock to ‘BUY’ from Accumulate with TP to Rs1826 (from Rs1238) on PE 23.3x of FY22 earnings.

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