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Yes Securities Report
We interacted with Ipca Laboratories Ltd. to better assess the progress of Unichem cross selling opportunity and clarity on U.S. trajectory in standalone business. Low hanging fruit in the form of better margin is largely achieved as Unichem would report ~15% operating profit margin in FY25.
Further improvement would require revenue traction which in turn is dependent on conducting bio-equivalent studies for large products in run up to dossier filings across new markets. While this would ultimately lead to better Goa site utilization (and margin), we understand the process would take about a years' time.
Company reiterated U.S. would see five-six launches in current year coupled with a similar number in next fiscal. We are cognizant Ipca was a market leader in its covered molecules prior to alerts and there has apparently not been much of price erosion in the intervening period.
Even so, it would still be a slow ramp up and not a dash towards the erstwhile scale in US. We tweak estimates and still remain 5-6% below consensus expectation for FY26/27. Accordingly, lower rating to Reduce primarily as we await Unichem dossier progress and US clarity before turning constructive.
Our revised target price stands at Rs 1,575 (earlier Rs 1,320) based on a 30 times FY27 EPS (versus 28 times FY26E earnings per share).
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