Accumulate Ipca Labs; target of Rs 1020: Dolat Capital

“Ipca Labs (Ipca) annual report 2013-14 highlights the robustness of its business model which has helped the company in reporting strong profitability despite headwinds in the domestic markets.”

“Considering the headwinds in terms of new pricing policy, price reduction of brands and market disturbance due to non- availability of products and trade dispute on margins, IPCA ended the year with revenue growth of 16.7 percent YoY backed by strong growth in export formulations. PAT on the other hand grew at robust 42.4 percent YoY on the back of better than expected operating margins. EBIDTA margins were up 255 bps from last year backed by depreciating rupee (65 percent is export sales) and higher contribution from export formulation sales.”

“We expect acceleration in export formulation revenues mainly led by a) uptick in US revenues- full utilization of Indore SEZ, b) sustained growth in its institutional business and c) gradual recovery in domestic formulations hereon shall add to growth momentum. The company has guided for 18-19 percent revenue growth and EBITDA margins in the range of 24-25 percent for FY15E. We estimate adjusted earnings to record 26 percent CAGR over FY14-16E. At CMP, the stock trades at 17.8x FY15E and 15.2x FY16E earnings. We maintain ‘Accumulate’ with a target price of ` 1020 (17x FY16E EPS),” says Dolat Capital research report.

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