Steady India growth; exports rely on Unichem synergy
IPCA Labs’ (IPCA) brand-building strength is poised to drive outperformance against IPM growth, with synergies from Unichem integration further accelerating earnings. Our positive outlook is based on several key factors: First, IPCA’s brand-building and new product launches will support sustained sales growth. Additionally, the company’s strong positioning in acute and chronic therapies (CVS, anti-diabetics, CNS, and urology)—will enable it to outperform IPM growth. Second, the synergies from Unichem’s acquisition are set to revitalise IPCA’s export business, leveraging Unichem’s US network for new launches and IPCA’s EU network for Unichem’s 80+ registered products. This cross-synergy will boost international expansion. Third, expansion into other export markets will act as a further growth driver, while IPCA’s in-house API manufacturing capabilities will improve operating performance and cost efficiency. Fourth, the continued growth of the API business—with IPCA’s leadership in sartans API and scale-up of new and Unichem’s API plants—will strengthen the company’s market position. Lastly, IPCA’s focus on its India business combined with Unichem synergies will ensure steady margin improvement and enhanced return ratios, driving EPS growth over the next few years. Over the past 12 months, IPCA’s stock has re-rated from ~25x to ~35x oneyear forward earnings (consensus estimates). Based on our projections, the stock trades at 43.5x/31.1x/24.5x FY25/26/27 EPS. We believe IPCA will trade at a premium to its historical range led by strong visibility of earnings growth acceleration (38% CAGR over FY24-27E vs ~5% over FY19-24), which we expect to remain sustainable beyond FY27E. We initiate coverage with a BUY rating and a target price of INR 1,800, based on 31x Q3FY27E EPS.
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