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Exports driven growth
Strong growth in exports especially large tender sales and up tick in
branded exports helped IPCA report sales growth of 27% YoY. We expect
sales growth momentum on exports front to continue. However, domestic
growth at 12% continued to be weak this quarter. Forex gains (Rs92m)
and higher other income helped reported profits. While the valuations at
15x FY12 are reasonable, the stock lacks near term triggers.
High tender sales and a low base in branded exports
q Net sales grew 27% YoY on back of strong branded export formulations growth
(65% YoY) while domestic formulations growth was weak at 12% YoY for 1QFY12
with some of leading brands not growing well.
q Branded exports growth was much higher than usual run rate due to a lower base
(Russia was weak same quarter last year) and strong performance in West Africa
and LatAm markets.
q Anti-malarial tender sales grew sharply, a trend likely to continue for another two
quarters as the ramp up started from 4QFY11.
q The company maintained their capex guidance at around Rs2.5bn for FY12 due to
need for expanding capacity in API segment.
Steady margins
q Better product mix (higher proportion of formulations) helped IPCA’s gross
margins that were countered by c. 30% YoY increase in overheads (Indore SEZ
not contributing much to topline).
q Forex gains of Rs91m helped reported profits during the quarter. A higher other
income also helped YoY growth.
q Over a year or two, we expect Ebitda margins to improve as the company is able
to improve utilisation at Indore SEZ facility and improve domestic growth.
q The management also expects to gain further share in artemisinin and
lumefantrine combination and expects to gain approval for artesunate and
amodiaquine combination in FY12.
Reasonable valuations, lacks near term triggers
q At 15x FY12CL, IPCA trades at reasonable valuations within the sector. The stock
lacks immediate triggers and current year (FY12) earnings growth looks weaker
due to Rs434m forex gain in FY11.
q Indore SEZ approval looks at least 8-9 months away could serve as a trigger at
that point.
q High base in September ending quarter would likely result in a YoY reported PAT
decline when they report in next quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exports driven growth
Strong growth in exports especially large tender sales and up tick in
branded exports helped IPCA report sales growth of 27% YoY. We expect
sales growth momentum on exports front to continue. However, domestic
growth at 12% continued to be weak this quarter. Forex gains (Rs92m)
and higher other income helped reported profits. While the valuations at
15x FY12 are reasonable, the stock lacks near term triggers.
High tender sales and a low base in branded exports
q Net sales grew 27% YoY on back of strong branded export formulations growth
(65% YoY) while domestic formulations growth was weak at 12% YoY for 1QFY12
with some of leading brands not growing well.
q Branded exports growth was much higher than usual run rate due to a lower base
(Russia was weak same quarter last year) and strong performance in West Africa
and LatAm markets.
q Anti-malarial tender sales grew sharply, a trend likely to continue for another two
quarters as the ramp up started from 4QFY11.
q The company maintained their capex guidance at around Rs2.5bn for FY12 due to
need for expanding capacity in API segment.
Steady margins
q Better product mix (higher proportion of formulations) helped IPCA’s gross
margins that were countered by c. 30% YoY increase in overheads (Indore SEZ
not contributing much to topline).
q Forex gains of Rs91m helped reported profits during the quarter. A higher other
income also helped YoY growth.
q Over a year or two, we expect Ebitda margins to improve as the company is able
to improve utilisation at Indore SEZ facility and improve domestic growth.
q The management also expects to gain further share in artemisinin and
lumefantrine combination and expects to gain approval for artesunate and
amodiaquine combination in FY12.
Reasonable valuations, lacks near term triggers
q At 15x FY12CL, IPCA trades at reasonable valuations within the sector. The stock
lacks immediate triggers and current year (FY12) earnings growth looks weaker
due to Rs434m forex gain in FY11.
q Indore SEZ approval looks at least 8-9 months away could serve as a trigger at
that point.
q High base in September ending quarter would likely result in a YoY reported PAT
decline when they report in next quarter.
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