Ipca Labs :: 2QFY2012 Result Update :: Angel Broking

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For 2QFY2012, Ipca Labs (Ipca) reported better-than-expected results. The top
line grew by 20.2% yoy to `618cr, higher than our estimates. Also, OPM came in
higher than expected at 24.6%. However, the company posted a dip of 18% yoy
in its net profit due to forex losses during the quarter. We recommend Buy on the
stock.
Results better than expectations: Ipca reported net sales of `618cr (`514cr), up
20.0% yoy, above our estimate of `530cr. The company posted OPM of 24.6%
(22.2%). Recurring profit came in at `77.3cr (`94.0cr), higher than our estimate
of `62.5cr. Segment wise, for 2QFY2012, the overall formulations business grew
by 23.3% to `489.7cr (`397.0cr), contributing 79.0% (77.2%) to the company’s
total revenue. The API business witnessed 9.4% growth during the quarter to
`128.3cr (`117.3cr), contributing 20.8% (22.8%) to the total revenue. Net profit
for the quarter declined by 18% yoy to `77cr.
Outlook and valuation: We expect net sales to post a 16.3% CAGR to `2,548cr
and EPS to register a 14.8% CAGR to `27.5 over FY2011–13E, driven by the US
and domestic markets and the API segment. At current levels, the stock is trading
at 16.5x and 12.0x FY2012E and FY2013E earnings, respectively. We
recommend Buy on the stock with a target price of `358.