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IPCA LABORATORIES
OUTPERFORMER (RS278, MCAP: RS35BN / US$769M)
• Ipca remains confident of clocking 20% revenue growth in FY12 and expects operating margins to improve as the
impact of recent field force additions kick in. It derives 70% of sales from formulations, with the remaining 30% from
API sales. API sales are expected to decline, with APIs being increasingly utilized for internal consumption.
• Domestic business: Ipca’s top three segments, anti-diabetic, CVS and anti-malarial, grew by 28%, 15% and 31% yoy
over 9MFY11. Anti-bacterial, GI and dermatology grew by 9-11% yoy. Ipca currently has 150 brands and plans to
launch 10-15 products annually. It remains positive on its ability to grow 18-20% per annum over the next few years.
• It has added 2000 employees to its field force over the past two years, including 1200 in FY11, taking the total to ~5000.
Of the 1200 added recently, 1000 were inducted in the existing divisions and 100 each in nephrology and urology,
segments created in the recent quarter.
• The management cited that the field force strength had largely stabilized, and expects to add only 400-500 employees
over the next two years. New field force additions would be in Dynamics, which would not be therapy–focused, but
target existing products with higher revenue potential.
• Ipca’s international branded business continues to do well. The management is positive on the prospects in Russia,
guiding for 30% growth rates hereon. The company currently markets 14 products in Russia. The LatAm, Middle East
and West African operations grew by 76% (to Rs50m), 9% (Rs170m) and 16% yoy (Rs220m) respectively in 9MFY11.
• The company continues to be optimistic about its ability to grow the global tender business of anti-malaria products
over the next few years, given low competition in the space.
• Indore SEZ: Ipca has received MHRA (UK) approval for its Indore SEZ facility and expects WHO approval in
Q4FY11. However, the management refrained from providing any timelines for US FDA approval. It intends to utilize
the facility to service only the UK market and WHO tenders until it receives US FDA approval.
• To hasten the approval process, the management has enrolled certain drugs from the Indore SEZ under the PEPFAR
programme. Under this programme, the US FDA is supposed to approve the product facilities within six months of
registration, which implies approval latest by June 2011.
• Ipca has incurred Rs1.4bn capex to date and plans to invest another Rs400m for packaging machinery in FY11. The
company expects to clock US$100m in sales from the Indore SEZ on full commissioning, i.e, 3-4 years from now.
• It continues to hedge its export receivables at 52% of anticipated exports over the next 12 months at a ~USD/INR rate of 48.
• Ipca has guided for capex of Rs2bn and Rs2.2bn in FY11 and FY12 respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IPCA LABORATORIES
OUTPERFORMER (RS278, MCAP: RS35BN / US$769M)
• Ipca remains confident of clocking 20% revenue growth in FY12 and expects operating margins to improve as the
impact of recent field force additions kick in. It derives 70% of sales from formulations, with the remaining 30% from
API sales. API sales are expected to decline, with APIs being increasingly utilized for internal consumption.
• Domestic business: Ipca’s top three segments, anti-diabetic, CVS and anti-malarial, grew by 28%, 15% and 31% yoy
over 9MFY11. Anti-bacterial, GI and dermatology grew by 9-11% yoy. Ipca currently has 150 brands and plans to
launch 10-15 products annually. It remains positive on its ability to grow 18-20% per annum over the next few years.
• It has added 2000 employees to its field force over the past two years, including 1200 in FY11, taking the total to ~5000.
Of the 1200 added recently, 1000 were inducted in the existing divisions and 100 each in nephrology and urology,
segments created in the recent quarter.
• The management cited that the field force strength had largely stabilized, and expects to add only 400-500 employees
over the next two years. New field force additions would be in Dynamics, which would not be therapy–focused, but
target existing products with higher revenue potential.
• Ipca’s international branded business continues to do well. The management is positive on the prospects in Russia,
guiding for 30% growth rates hereon. The company currently markets 14 products in Russia. The LatAm, Middle East
and West African operations grew by 76% (to Rs50m), 9% (Rs170m) and 16% yoy (Rs220m) respectively in 9MFY11.
• The company continues to be optimistic about its ability to grow the global tender business of anti-malaria products
over the next few years, given low competition in the space.
• Indore SEZ: Ipca has received MHRA (UK) approval for its Indore SEZ facility and expects WHO approval in
Q4FY11. However, the management refrained from providing any timelines for US FDA approval. It intends to utilize
the facility to service only the UK market and WHO tenders until it receives US FDA approval.
• To hasten the approval process, the management has enrolled certain drugs from the Indore SEZ under the PEPFAR
programme. Under this programme, the US FDA is supposed to approve the product facilities within six months of
registration, which implies approval latest by June 2011.
• Ipca has incurred Rs1.4bn capex to date and plans to invest another Rs400m for packaging machinery in FY11. The
company expects to clock US$100m in sales from the Indore SEZ on full commissioning, i.e, 3-4 years from now.
• It continues to hedge its export receivables at 52% of anticipated exports over the next 12 months at a ~USD/INR rate of 48.
• Ipca has guided for capex of Rs2bn and Rs2.2bn in FY11 and FY12 respectively.
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