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Recommendations India

Ipca Laboratories 4QFY2014 performance highlights and results update

June 3, 2014, Tuesday, 11:08 GMT | 06:08 EST | 14:38 IST | 17:08 SGT
Contributed by Angel Broking


For 4QFY2014, Ipca Laboratories (Ipca Labs) posted results above our expectations on the net profit front, but posted sales lower than expected. Sales for the quarter came in at Rs.740cr (V/s an expected Rs.824cr), up 12.3% yoy. The OPM came in at 23.3% (V/s an expected 23.7%), expanding by 370bp yoy. This, coupled with a growth in the top-line, aided the adjusted net profit to come in at Rs.123cr, a yoy growth of 63.3%. We recommend an Accumulate on the stock with a price target of Rs.882.


Results better than expectations

The company posted sales of Rs.740cr (V/s an expected Rs.854cr) for 4QFY2014, up 12.3% yoy. The growth was driven by formulations, which grew by 16% yoy, while the API grew by only 2% yoy. Domestic sales grew by 7.9% yoy, while exports grew by 14.5% yoy. The OPM came in at 23.3% (V/s an expected 23.7%), expanding by 370bp yoy. This, coupled with a growth in the top-line, aided the adjusted net profit to come in at Rs.123cr, a yoy growth of 63.3%.


Outlook and valuation

We expect net sales to post a 19.4% CAGR to Rs.4,563cr and EPS to register a 22.4% CAGR to Rs.58.8 over FY2014–16, 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 an Accumulate on the stock with a price target of Rs.882.