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Recommendations India

IPCA Laboratories 1QFY2015 performance highlights and results update

August 4, 2014, Monday, 13:44 GMT | 08:44 EST | 17:14 IST | 20:44 SGT
Contributed by Angel Broking


For 1QFY2015, IPCA Laboratories (Ipca) posted sales and net profit just in line with our expectations. The company posted sales of Rs.928cr (V/s an expected Rs.913cr), ie a growth of 17% yoy. The sales growth was driven by exports, which rose by 14.3% yoy, while domestic sales grew by 20.7% yoy. On the OPM front, the margins came in at 24.0% (V/s an expected 22.9%), an expansion of 410bp yoy, mainly on back of GPM expansion and lower rise in other expenditure. Thus, the Adj. PAT came in at Rs.145.5cr (V/s an expected Rs.147.8cr), registering a growth of 34.7% yoy. The company has reduced its revenue growth guidance to 12% (from an earlier 17-18%), with EBITDA margins guided to fall by 100bp yoy to 24% (earlier guidance was of 25-25.5%). The revision takes into account the temporary discontinuation of operations to the US. We retain our Buy on the stock with a price target of Rs.986.

Results better than expectations on OPM front: The company posted sales of Rs.928cr (V/s an expected Rs.913cr), a yoy growth of 17.0%. The sales growth was driven by exports, which rose by 14.3% yoy, while domestic sales rose by 20.7% yoy. On the OPM front, the margins came in at 24.0% (V/s an expected 22.9%), an expansion of 410bp yoy, mainly on back of GPM expansion. The GPM for the quarter stood at 63.1%, V/s 59.1% in 1QFY2014. The OPM was also aided by a lower rise in other expenditure (of 13.8% yoy). Thus, the Adj. PAT came in at Rs.145.5cr (V/s an expected Rs.147.8cr), registering a yoy growth of 34.7%.

Outlook and Valuation: We expect net sales to post a CAGR of 18.8% to Rs.4,563cr and EPS to register a CAGR of 20.9% to Rs.58.8 over FY2014–16E, driven by the US and domestic markets. At the current levels, the stock is trading at 15.9x and 13.4x FY2015E and FY2016E earnings, respectively. We recommend a Buy on the stock with a price target of Rs.986.