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Motilal Oswal Report
We value the stock at 36 times 12 months forward earnings to arrive at our target price of Rs 1,980. We reiterate our Buy rating on Ipca Laboratories Ltd.
During FY19-FY24, Ipca Laboratories' earnings recorded a meager 3% compound annual growth rate, led by a 200 basis points drop in its Ebitda margin. Nonetheless, we anticipate that the company would generate a robust earnings growth of 27% during FY25-FY27, driven by the 170 bp improvement in margin. Despite enjoying a strong position in the export and DF markets, Ipca is reviving its U.S. business through new and relaunched products as well as the integration with Unichem. To further improve Unichem's margin, Ipca is optimising its processes, improving operational efficiency, and sourcing raw materials from its site.
Key downside risks
Pricing pressure in the active pharma ingredient segment to hurt growth.
Higher freight costs and delays in exports due to geopolitical challenges.
Inclusion of brands in the National List of Essential Medicines price list.
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