Indoco Remedies - Resolution Of Facilities A Key Monitorable: Nirmal Bang
Goa Plant II and III are under official action indicated and hence supplies moderated in Q1 FY24.
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Nirmal Bang Report
Indoco Remedies Ltd.’s revenue is expected to clock 12.7% compound annual growth rate over FY23-FY25E mainly on the back of growth in domestic market export formulations business. We are building in 16.7% constant currency CAGR over FY23-FY25E for the U.S. market despite official action indicated on Goa Plant II and Plant III.
The domestic formulations business is expected to clock 10% CAGR over FY23-FY25E to Rs 9.6 billion mainly on the back of increased focus on new launches and the chronic segment.
Ebitda margin is expected to be at ~16-18% in FY24. Net profit is expected to clock 24.8% CAGR over FY23-FY25E, mainly driven by an improvement in operational performance and higher other income.
The company is currently trading at 19.2 times/13.2 times price-to-earning on FY24E/FY25E EPS and 10.3 times/7.8 times enterprise value/Ebitda on FY24E/FY25E.
We estimate free cash flow generation of ~Rs 1.5 billion over FY24E-FY25E with minimal capex requirements.
Return on equity/return on capital employed will remain decent at 17.5%/14.3% by FY25E. We like Indoco Remedies due to high contribution from the domestic market and robust complex products portfolio for the U.S. market.
However, we are concerned about the company's continued disappointing performance in the domestic market. Besides, it is highly dependent on certain niche launches for growth in the U.S. market.
Hence, we maintain 'Accumulate' rating with a target price of Rs 352, valuing it at 14 times June-25E earnings per share.
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