Ipca Laboratories Limited is an India-based pharmaceutical company. The Company has manufacturing over 350 formulations and 80 APIs for various therapeutic segments. Its formulations basket includes generics for the developed markets and branded formulations for emerging markets. It manufactures over 350 formulations in virtually every dosage form: oral solids and liquids, dry powders for suspension, and injectables. The Company’s manufactured APIs include Atenolol (anti-hypertensive), Chloroquine Phosphate (anti-malarial), Furosemide (diuretic), Hydroxychloroquine Sulphate (NSAID), Metoprolol Succinate (anti-hypertensive), Metoprolol Tartrate (anti-hypertensive) and Pyrantel Salts (anthelmintic). The Company has brands in 5 therapeutic areas, with 4 of its branded formulations. The Company’s products are exported to approximately 130 countries across the world and in diversified markets, such as Africa, Australia, Asia, Europe and the United States.
For 4QFY2015, IPCA Laboratories (IPCA Labs) posted a poor set of numbers. Sales came in at `623cr V/s an estimated `750cr and V/s `744cr in 4QFY2014, a dip of 16.3% yoy. On the operating front, the OPM came in at 4.6% V/s 27.0% in the corresponding period of last year. This, along with a rise in interest expenses and deprecation (up 65.4% and 121.8% yoy respectively), led the company to post an Adj loss of `10cr V/s a profit of `141cr in 4QFY2014. For FY2016, the Management has given a guidance of 10% yoy growth in sales. While problems are likely to persist in FY2016, still, given the valuations, we maintain our Buy rating on the stock with a price target of `736.
IPCA Laboratories (IPCA) announced lower than estimated results for 1QFY2016. The company posted sales of Rs751cr V/s an estimated Rs883cr; sales dipped by 19.1% yoy owing to import alert levied by the USFDA on its Ratlam facility, a sluggish anti- malarial business, and impact on emerging markets on back of currency fluctuations. The EBDITA margin consequently came in at 10.0% V/s an expected 12.6% and V/s 24.0% in 1QFY2015, on account of lower sales during the quarter. Consequently, the Adj. PAT came in at Rs28cr V/s an estimated Rs69cr and V/s Rs145cr in 1QFY2015, a decline of 80.8% yoy. For FY2016, the Management has given a guidance of 7-8% yoy growth in sales. We maintain our accumulate rating on the stock with a target price of Rs800. Results lower than expectations: IPCA posted sales of Rs751cr V/s an estimated Rs883cr; sales dipped by 19.1% yoy. Domestic sales came in at Rs374cr, a growth of 4.7% yoy, while exports sales amounted to Rs377cr, a dip of 32.0% yoy. Export formulations, which came in at Rs224.8cr, dipped by 42% yoy. The dip in sales came on account of the import alert levied by the USFDA on its facility, lower anti malarial business, and impact on emerging markets on back of currency fluctuations. The EBDITA margin consequently came in at 10.0%, lower than an expected 12.6%, and v/s 24.0% in 1QFY2015, on account of lower sales during the quarter. Consequently, the Adj. PAT came in at Rs28cr V/s an estimated Rs69cr and V/s Rs145cr in 1QFY2015, a decline of 80.8% yoy. Outlook and Valuation: We expect net sales to post a 14.8% CAGR to Rs4,109cr, and EPS to register a 31.5% CAGR to Rs34.8 over FY2015–17E. The company’s financials will be impacted by the USFDA import alert on the Ratlam facility and 483s on the Indore and Silvassa facilities. For FY2016, the Management has given a guidance of 7-8% yoy growth in sales. We recommend a accumulate rating on the stock.
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