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Ipca Laboratories Ltd Research Report - 14th Jun 2016

Pharmaceutical | Published on Jun 14th 2016

IT

IPCA Laboratories (Ipca)’s results for 4QFY2016 have come in much lower than our expectations on the sales and the operating front, while a tax write-back led the net profit to outperform our estimates. Sales for the quarter de-grew 1.7% yoy to Rs612cr (V/s Rs680cr expected). On the operating front, the gross margin came in at 64.4% V/s 58.8% in 4QFY2015, while the EBDITA margin came in at 8.4% V/s 4.6% in 4QFY2015. The reported net profit for the quarter thus came in at Rs38cr V/s Rs8cr in 4QFY2015 while the Adj. net profit stood at Rs38cr V/s a loss of Rs10cr in 4QFY2015. While the current performance of the company is being impacted due to its key plants being under the USFDA scanner, we believe once out of it, the company can bounce back to its normalized ROE of 25%. Thus, we maintain our Buy on the stock. Results lower than expectations: For the quarter, the company’s sales declined by 1.7% yoy to Rs612cr (V/s Rs680cr expected). The dip in the sales was owing to a 26% yoy decline in API sales (Rs114cr), while Formulations (Rs498cr) posted a yoy growth of 6.0%. Within formulations, domestic formulations posted a yoy growth of 9%. On the operating front, the gross margin came in at 64.4% V/s 58.8% in 4QFY2015, while the EBDITA margin came in at 8.4% V/s 4.6% in 4QFY2015. The reported net profit for the quarter thus came in at Rs38cr V/s Rs8cr in 4QFY2015 while the, Adj. net profit stood at Rs38cr V/s a loss of Rs10cr in 4QFY2015. Outlook and Valuation: We expect net sales to post a 15.6% CAGR to Rs3,799cr, and EPS to register a 36.5% CAGR to `19.7 over FY2016–18E. The company’s financials will be impacted by the USFDA import alert on the Ratlam, Indore and Silvassa facilities. While the problems are likely to persist for a while, we expect the company’s performance to witness a gradual pick-up going forward. Given the valuations, we maintain our Buy rating on the stock with a price target of Rs613.

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CMP 431
Target Price 613
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)7,057.74
MCAP NSE (Rs in Cr)7,053.32
P/E (x)43.19
EPS (Rs.)12.95
BV (Rs.)187.95
Div Yield (%)0.00
FV (Rs.)2.00
P/BV (x)2.98
EV/Sales (x)2.67
EV/EBITDA (x)23.62

Shareholding Pattern (%)

Promoter46.0
Institution22.0
Foreign16.0
Public & Others13.0
Corporate3.0
Grand Total100.0

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