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Ipca Laboratories Ltd
Steady business, attractive valuations
Mr. Harish Kamath – Senior V.P., Legal & Company Secretary shared
his outlook on the industry and the company
Key Highlights
§ Growth in domestic business remains subdued due to higher attrition, lower antimalarial
and anti-infective sales. The company’s anti-bacterial division witnessed
35% decline in revenues largely led by 55% attrition in this division.
§ IPCA has doubled its domestic formulations field force in the last two years to 4300
now mainly in key therapies of Pain and CVS segment.
§ Management has lowered it’s a domestic growth guidance to 9-10% in H2FY12,
however has maintained its FY13E growth guidance at 15-18% and operating
margins are expected to improve once the additional field force becomes productive
§ Indore SEZ USFDA approval remains the key upside catalyst – approval would pave
way for improved profitability and revenue visibility. Ipca is currently incurring fixed
overheads of Rs180mn annually from this plant and has incurred a capex of Rs1.5bn
§ The company is waiting for the USFDA to visit its Indore SEZ plant and expects
approval by Q4FY12. The approval will trigger launch of 5 ANDAs in US which would
garner Rs600mn in first year and Rs1.5bn in second year. Peak revenue potential
from this facility is estimated at Rs3-4bn over the next 2-3 years.
§ Till date, Ipca has 24 filings in the US with 12 pending approvals. The company has
plans to file 10-12 ANDA annually. 8 products in US command 20-50% market share.
Out of the 8, 7 are marketed by Ranbaxy
§ Anti malarial business to grow from Rs1.2bn last year to Rs2.5bn this year and with
the prequalification of Artisunate, company will further be able to participate in the
rest of the 20% of anti malarial tender business (total market $250-$300mn)
§ In the exports business, growth will also be led by tender business in Africa and
branded formulations business in CIS, Africa and Australia led by new launches
§ Impact of proposed drug pricing policy would be minimal at ~2% as only 2-3 products
are brand leaders in their respective therapy.
§ Guidance – Expect FY12 revenues to grow at 20% with exports off-setting slower
growth in domestic business. FY13 growth of 16-18% will be led by new launches of
about 25 products coupled with 1-2 product each from 13 divisions.
Valuation
We expect Ipca to report 14% growth in revenues in FY12E and 19% growth in FY13E.
EBIDTA margins are expected to increase from 19.1% in FY11 to 19.9% in FY12E and
20.9% in FY13E. Earnings will grow by 23% CAGR over FY11-13E. Based on strong
growth in export formulations, we maintain our rating on the stock to Buy with a target
price of Rs392 (14xFY13E earnings). At CMP, IPCA trades at 11x FY12E and 9x
FY13E EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ipca Laboratories Ltd
Steady business, attractive valuations
Mr. Harish Kamath – Senior V.P., Legal & Company Secretary shared
his outlook on the industry and the company
Key Highlights
§ Growth in domestic business remains subdued due to higher attrition, lower antimalarial
and anti-infective sales. The company’s anti-bacterial division witnessed
35% decline in revenues largely led by 55% attrition in this division.
§ IPCA has doubled its domestic formulations field force in the last two years to 4300
now mainly in key therapies of Pain and CVS segment.
§ Management has lowered it’s a domestic growth guidance to 9-10% in H2FY12,
however has maintained its FY13E growth guidance at 15-18% and operating
margins are expected to improve once the additional field force becomes productive
§ Indore SEZ USFDA approval remains the key upside catalyst – approval would pave
way for improved profitability and revenue visibility. Ipca is currently incurring fixed
overheads of Rs180mn annually from this plant and has incurred a capex of Rs1.5bn
§ The company is waiting for the USFDA to visit its Indore SEZ plant and expects
approval by Q4FY12. The approval will trigger launch of 5 ANDAs in US which would
garner Rs600mn in first year and Rs1.5bn in second year. Peak revenue potential
from this facility is estimated at Rs3-4bn over the next 2-3 years.
§ Till date, Ipca has 24 filings in the US with 12 pending approvals. The company has
plans to file 10-12 ANDA annually. 8 products in US command 20-50% market share.
Out of the 8, 7 are marketed by Ranbaxy
§ Anti malarial business to grow from Rs1.2bn last year to Rs2.5bn this year and with
the prequalification of Artisunate, company will further be able to participate in the
rest of the 20% of anti malarial tender business (total market $250-$300mn)
§ In the exports business, growth will also be led by tender business in Africa and
branded formulations business in CIS, Africa and Australia led by new launches
§ Impact of proposed drug pricing policy would be minimal at ~2% as only 2-3 products
are brand leaders in their respective therapy.
§ Guidance – Expect FY12 revenues to grow at 20% with exports off-setting slower
growth in domestic business. FY13 growth of 16-18% will be led by new launches of
about 25 products coupled with 1-2 product each from 13 divisions.
Valuation
We expect Ipca to report 14% growth in revenues in FY12E and 19% growth in FY13E.
EBIDTA margins are expected to increase from 19.1% in FY11 to 19.9% in FY12E and
20.9% in FY13E. Earnings will grow by 23% CAGR over FY11-13E. Based on strong
growth in export formulations, we maintain our rating on the stock to Buy with a target
price of Rs392 (14xFY13E earnings). At CMP, IPCA trades at 11x FY12E and 9x
FY13E EPS.
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