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Ipca is all set to enter into a new growth trajectory with the long
awaited Indore SEZ approval now in sight. Management announced
that the new facility at Indore has gone through successful FDA
inspection and should receive formal approval shortly. The company
expects immediate FDA clearance of six ANDAs with approval of the
facility. We believe full utilization of new capacity at Indore can add
~Rs4bn incremental sales. Ipca has a strong franchise in the Indian
branded business coupled with high margin exports. Ipca had
consistently grown above the Indian pharmaceutical industry. While
last few quarter’s performance was lackluster, we expect robust
performance to set in at the domestic front. Export business, which
was restrained due to capacity constraint, will also flourish following
the Indore SEZ approval. We raise our FY12-14E estimates to factor in
Indore SEZ contribution & higher margins. We expect 20% CAGR in
revenues and 23% CAGR in earnings. We maintain our BUY rating on
Ipca and raise our 9-month target price from Rs332 to Rs382.
US FDA approval expected shortly; a near term trigger
Ipca has been facing capacity issues for the last few quarters. USFDA
approval for Indore SEZ is a key trigger for accelerating growth in the
US. Management announced that new facility at Indore has gone
through successful FDA inspection and should receive formal approval
shortly (no #483 observations during inspection). We believe this will
further enhance margins as company currently incurs fixed cost of
~Rs60mn every quarter.
Well capitalized on Anti-Malarial brand
Ipca is one of the few WHO approved companies for sourcing of drugs
like Amodiaquine, Artesunate, Artemether & Lumefantrine. Ipca has
very well capitalized on the opportunity (evident from past few
quarter’s sales from this business). The Company now aims for Rs4bn
revenue by participating in tender process (FY11 sales at Rs1.2bn and
opportunity worth ~US$250mn).
Valuation attractive; recommend BUY
We estimate revenue and PAT CAGR of 20% and 23% respectively
over FY11-14. Ipca has a strong franchise in Indian branded business
(55% of total business) coupled with high margin exports. We believe
the valuations are still attractive at 11x FY13E EPS as we expect
expansion in trading multiple. We maintain our BUY rating with a
revised 9-month target price at Rs382.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Ipca is all set to enter into a new growth trajectory with the long
awaited Indore SEZ approval now in sight. Management announced
that the new facility at Indore has gone through successful FDA
inspection and should receive formal approval shortly. The company
expects immediate FDA clearance of six ANDAs with approval of the
facility. We believe full utilization of new capacity at Indore can add
~Rs4bn incremental sales. Ipca has a strong franchise in the Indian
branded business coupled with high margin exports. Ipca had
consistently grown above the Indian pharmaceutical industry. While
last few quarter’s performance was lackluster, we expect robust
performance to set in at the domestic front. Export business, which
was restrained due to capacity constraint, will also flourish following
the Indore SEZ approval. We raise our FY12-14E estimates to factor in
Indore SEZ contribution & higher margins. We expect 20% CAGR in
revenues and 23% CAGR in earnings. We maintain our BUY rating on
Ipca and raise our 9-month target price from Rs332 to Rs382.
US FDA approval expected shortly; a near term trigger
Ipca has been facing capacity issues for the last few quarters. USFDA
approval for Indore SEZ is a key trigger for accelerating growth in the
US. Management announced that new facility at Indore has gone
through successful FDA inspection and should receive formal approval
shortly (no #483 observations during inspection). We believe this will
further enhance margins as company currently incurs fixed cost of
~Rs60mn every quarter.
Well capitalized on Anti-Malarial brand
Ipca is one of the few WHO approved companies for sourcing of drugs
like Amodiaquine, Artesunate, Artemether & Lumefantrine. Ipca has
very well capitalized on the opportunity (evident from past few
quarter’s sales from this business). The Company now aims for Rs4bn
revenue by participating in tender process (FY11 sales at Rs1.2bn and
opportunity worth ~US$250mn).
Valuation attractive; recommend BUY
We estimate revenue and PAT CAGR of 20% and 23% respectively
over FY11-14. Ipca has a strong franchise in Indian branded business
(55% of total business) coupled with high margin exports. We believe
the valuations are still attractive at 11x FY13E EPS as we expect
expansion in trading multiple. We maintain our BUY rating with a
revised 9-month target price at Rs382.
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