Ipca Labs Q4 Results Review - DF, Generic Exports Lead To Superior Operating Performance: Motilal Oswal

Motilal Oswal Report

Ipca Laboratories Ltd. delivered better-than-expected operating performance in Q4 FY24, led by improved domestic formulation sales and stable pricing in the API segment. Adjusted earnings were lower than our estimate, largely due to higher minority interest.

We cut our earnings estimates by 12%/14% for FY25/FY26, factoring in:

1. gradual uptick from the re-launches of abbreviated new drug application in the U.S. market,

2. a challenging outlook in the branded generic exports segment, and

3. moderation in the growth outlook in acute therapies within the DF segment.

We value IPCA at 26 times 12 months forward earnings to arrive at our target price of Rs 1,140.

IPCA continues to progress well on improving the profitability of Unichem and enhancing synergy with it. Management is also working on scaling up the U.S. generics business from its own facility.

Further, it remains on track to outperform the industry in the DF segment. Accordingly, we model a 39% earnings CAGR over FY24-26, partly due to the low base of FY24.

The current valuation adequately factors in the upside in earnings. Reiterate Neutral.

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