Ipca Labs Strong quarter, maintain Buy :: Anand Rathi

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Ipca Labs
Strong quarter, maintain Buy
 Q2FY11 results. Ipca reported good Q2FY11 figures with yoy
growths of 20.5% in revenue and 13.1% in adjusted net profit.
Net profit growth was lower owing to the 90-bp drop in EBITDA
margin. (Q2FY10 had a high 23.7% margin owing to favourable
currency movements.)
 Domestic formulations – key driver. Indian formulations grew
exceptionally well at 29.4% yoy (contributing ~40% of revenue)
fuelled by growth in most therapeutic areas. The anti-malarial
segment saw a 41% rise owing to substantial increase in the
incidence of malaria in most of the country.
 Exports formulations – scaling up. This segment grew 27.1%
yoy (~30% of sales) led by Ipca’s continuing efforts to expand
into new areas, increase the number of products and >100%
growth in supplies to tenders for anti-malarial products. Approval
for the Indore SEZ plant from UKMHRA is expected by end-
Q3FY11 and from USFDA by end-Q4FY11.
 Outlook. We expect the growth momentum to continue, driven
by higher-than-industry growth in domestic formulations,
continuous expansion in export formulations and expecting better
API business in H2FY11. We thus maintain our estimates.
 Valuation. At CMP, Ipca trades at 14.8x FY11e and 11.7x FY12e
earnings. We retain our target price of `356 and re-iterate Buy.