IPCA Laboratories Ltd - Buy at CMP and add on declines :: HDFC Sec

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IPCA Laboratories - Ratlam Import Ban: US Plans Derailed, Once Again; Company Update :: Edelweiss

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IPCA Labs -Ratlam takes toll on numbers… :: ICICI Securities, PDF link

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IPCA Laboratories - Near Term Challenging; Result Update Q2FY15 :: Edelweiss, PDF link

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HSBC Research, Looking at mid-cap themes for 2014

 Mid-caps have underperformed largecaps in the last 6 years. With no easing
in sight we remain selective on them
 Three themes to play in 2014:
insulation from leverage-related stress;
rising utilisation; and strong earnings
momentum with reasonable valuations
 Analysts’ preferred plays: PTCIN, IPCA,
TRP, PEPL, BHFC, LICHF and ILFT

IPCA Labs- Outlook robust, valuation upsides strong – initiate with BUY :: Religare Research

Outlook robust, valuation upsides strong – initiate with BUY
We initiate coverage on IPCA with a BUY and a TP of Rs 880. We like IPCA
due to (a) sharp ramp-up in US sales (post Indore SEZ contributing from
1QFY15), (b) superior earnings growth (25% EPS CAGR vs. 20% for peers)
led by margin expansion & (c) attractive valuations (trades at 20% discount
to mid-sized peers). We expect re-rating led by earnings upgrades on faster
domestic growth (from H2) & improved biz. mix driving margin surprise. Our
TP (16x Dec’15E EPS, a 20% discount to sector) implies a 19% upside.
 Formulations-led revenue growth: We forecast 18% sales CAGR over FY13-FY16E
led by both domestic (16% CAGR, 32% of sales) and export (23% CAGR, 44% of
sales) formulations. A ramp-up in US generics (aided by Indore SEZ contribution),
sustained anti-malarial tender wins and new launches in branded markets brighten
export growth prospects. Higher captive utilisation would limit growth in the lowermargin API biz (27% of sales) to 15%, thereby improving the overall revenue mix.
 Domestic growth to rebound on improving productivity: Post one-time impact of
the new pricing policy, IPCA’s domestic growth to bounce-back (to 16% from11% in
1H) over FY13-FY16 on (a) higher thrust on chronic segmentslike cardiac, pain,
diabetes &(b) improving productivity of recently added field-force (25% of total).
 Margin outlook firm: IPCA’s EBITDA margins should to improve to ~24% (22.2% in
FY13) on (a) rising contribution of high-margin US sales, (b) higher-than-expected
margin-accretive anti-malarial tender supplies (14% of sales), and (c) belowexpected impact of NLEM-listed products in the domestic market. We thus expect a
21% EBITDA CAGR over FY13-FY16E (faster than 18% sales growth in this period).
 Earnings momentum to drive upsides: IPCA’s valuation discount of 20% to mid-cap
peers would narrow due to (a)rising growth visibility (25% EPS CAGR), (b)improving
RoEs (26% in FY16E vs. 23% now) and (c) lower gearing (0.2x in FY16E vs. 0.4x now).��

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Ipca Labs - Karvy

Revenues Outperform, Margins Lower due to
higher R & D
Revenues increased by 26.9%YoY to Rs8,056mn compared to Rs6,344mn in
Q1FY13. Operating margins are down by 110bps to 21.2% as against 22.3%
in Q1FY13 due to higher R & D expenses. Net Profit increased by 67%YoY
to Rs718mn in Q1FY14 in line with our expectation of Rs 702mn.
Revenue Details: Ipca’s Export formulation grew by 46.9% YoY to
Rs.3300mn higher than our expectations of Rs2,945mn. However, Domestic
formulation business increased by 12 % YoY to Rs2504mn in line with our
expectation of Rs2511mn. In Exports formulations, Branded promotion
revenues grew by 62%YoY to Rs730mn. Institutional business grew by
40%YoY to Rs839mn while Generic Business showed growth of 47%YoY to
Rs1,730mn. In APIs, Exports increased by 17%YoY to Rs1,666mn while
Domestic grew by 16%YoY to Rs456mn.
Margins Contract: Companyʹs EBITDA Margins stood at 21.2% (our
estimates 22.5%) in Q1FY14 lower than 22.3% reported in Q1FY13. Margins
were lower on account of high material cost due to product‐mix and higher R
& D expenses due to clinical trials conducted for a 505(b)2 product.
Companyʹs net profit stood at Rs718mn in Q1FY14, in line with our estimate
ofRs. 702mn.
Outlook and Valuation: We decrease our revenues by 0.4% to Rs34.7bn for
FY14E and by 1 % to Rs 41.6 bn for FY 15E mainly on account of downgrade
in Export API business. We marginally downgrade EBIDTA margins but our
EPS downgrade is 3.1 % for FY14E to Rs37.8 and by 1.1% for FY15E to Rs45.8.
We reduce our price target by 1 % to Rs687 based on 15x FY15E. Due to
limited upside (3%) we maintain our SELL recommendation on the stock.

IPCA Labs — book profits ::Business Line

Sizzling Stocks: Ashok Leyland and Ipca Lab:: Business Line

IPCA Lab :: Prabhudas Lilladher MID-CAP top pick

IPCA Labs is one of the better managed mid-cap pharma companies:
Consistent improvement in profitability along with strong growth in
business. Both of the key business segments of the company viz.
international formulation business and domestic formulation business are
likely to do well over next couple of years.
International business to grow on the back of strong revenue ramp-up: In
US post the recent USFDA approval for company’s Indore SEZ which
eliminates supply constraint faced by the company. Expect 31% revenue
CAGR in US over FY12-14. Further, institutional business is scaling up
rapidly with revenue expected to move up from Rs1.22b in FY11 to Rs4b in
FY14. IPCA is set to become one of the largest players globally in antimalaria
tender business and this is the most profitable business for the
company. Branded formulation exports are likely to grow at 25% CAGR led
by increasing geographic penetration and new product launches.
Domestic formulation business to outperform the industry: The company
has consistently outperformed the industry in the past, led by rising share
of chronic segments, product selection, increase in the field force and
brand building activity. The contribution from fast growing and lucrative
chronic therapeutic segments is on rise. It currently contributes 65% to
domestic formulation business. The performance in FY12 was impacted by
lower incidence of Malaria, high attrition in the field force and
restructuring of marketing divisions. However the management has taken
corrective measures and growth of this business should be robust going
forward.
Outlook and Valuations: We expect strong earnings CAGR of 35% over
FY12-14 led by robust topline growth of 17% over the same period.
Despite Rs5b capex planned over next 2 years, the company is likely to
sustain healthy return rations and low gearing. Expect RoCE to remain
above 25% for next 2 years with free cash-flow generation of Rs3.3b. The
stock is trading at 14.4xFY13E & 11.1xFY14E earnings which is at significant
discount to large cap and some of the mid-cap companies in the sector.

IPCA Laboratories - Target Price: ` 487 Accumulate ::Dolat Capital

IPCA has transformed itself from a leading API manufacturer to a fully
integrated formulation company. We anticipate domestic formulations
to sustain growth trajectory from hereon (16% CAGR over FY12-14E) aided
by growth in CVS & pain management. We expect export formulations
to register 21% growth over FY12-14E mainly driven by increasing ramp
up in its US generics biz and higher contribution from institutional based
sales. The Indore SEZ will contribute revenue of ` 300-400mn in FY13E
(all of it in Q4FY13E) and ` 1bn in FY14E. Approvals from the recently
FDA approved Indore SEZ facility (approx 12-14 filings so far) is expected
to kick in Oct-Nov’12 onwards. The management appears confident of
US generics business to reach USD100mn by FY16E.
EBITDA margin guidance for the year is an improvement of 225bps YoY
(150bps shall be forex benefit). The management re-iterates its long
term growth strategy - doubling of revenues every four years.

IPCA Laboratories - Entering in the next league; initiating coverage; Buy: Edelweiss

IPCA Laboratories (IPCA IN, INR 446, Buy)
Our earnings are 12%-16% ahead of Street on account of: a) strong ramp-up in the US business, b) higher traction in domestic business and c) 30% CAGR in Institutional Anti-Malaria (IAM). We expect earnings CAGR of 29% (Street estimates at 19%), driven by 19% revenue CAGR and 250bps margin expansion over FY12-14E. With a profit of INR5bn by FY14, IPCA will enter the big league that would potentially re-rate the stock. We initiate with ‘BUY/SO’ rating and TP of INR582/share (14x FY14E EPS).

IPCA Labs USFDA approval for Indore SEZ aids visibility; Raise PO �� BofA Merrill Lynch,

IPCA Labs
USFDA approval for Indore SEZ
aids visibility; Raise PO
�� Raise PO on improved visibility; Reiterate Buy
The much-awaited approval of IPCA’s Indore SEZ facility by USFDA opens up
growth opportunities for IPCA. While we had factored this for 2HFY13, an earlier
approval improves sales visibility for the US business, facing supply constraints
currently. We raise our sales forecasts by ~3%, mainly on higher US sales,
leading to an EPS estimate increase of 2-3%. Accordingly, we raise our PO to
Rs450, to factor (a) the higher EPS estimates and (b) a likely re-rating to 15x
FY13E P/E (vs. 14x) on higher visibility.

Investment Focus - IPCA Labs: Buy ::Business Line

Sustainable growth and reasonable valuation makes IPCA Labs a good stock idea for investors with a one-two year perspective. Consistent growth in the domestic business coupled with a pick-up in US exports after approval of the company’s Indore facility may improve the company’s performance over the next year. The stock looks attractive at 12.2 times estimated earnings for FY13.

Formulation sales account for 76 per cent of revenue. About 30 per cent is from the domestic market, and the remaining from exports. A strong presence in the fast-growing chronic therapies such as anti-diabetes, pain management and cardiovascular remedies, apart from cost advantages from backward integration, may help IPCA outgrow the domestic pharma market. The company has consciously reduced its dependence on acute therapies such as anti-malarials and anti-infectives. Chronic therapies contribute over 65 per cent to the segment’s sales. Apart from being seasonal, competition in the acute therapies can be quite bruising.

IPCA LAB-Buy--Tracking Technicals : Anand Rathi

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SCRIP NAME : IPCA LAB                                            SECTOR  : PHARMACEUTICALS                                                             Date : 10^th May, 2012.

CURRENT TREND : BULLISH                 Time Horizon : 3 Months         Buy in the Range of  Rs.350-360              Stop loss Rs.332( Closing Basis)

TARGETS :       1st Target: Rs.402

2nd Target: Rs.430

SUPPORTING TECHNICAL COMMENTS

IPCALAB- Rs.358 has broken out from multiple top of Rs.350 and has made all time high of Rs.375 and has seen a throw-back. Now stock can soon consolidate and move higher and target of Rs.402 & 425 is possible in the stock in next 2-3months. Stock trades above all major averages, with 20DMA Rs.352, 100DMA Rs.319 and 200DMA Rs.299. On weekly charts the stock has shown  a V-Shape recovery which is normally very positive.

Thanks & Regards

IPCA Laboratories :Target Price: ` 402 Buy: Dolat Capital

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Captivating Growth Story!!
IPCA has transformed itself from a leading API manufacturer to a fully integrated formulation company. It has an
intriguing business mix of branded formulations as well as generics and is well diversified geographically. We
anticipate export formulations to register 30% growth over FY11-14E mainly driven by increasing contribution
from institutional based sales and ramp up in its US generics biz. The successful USFDA inspection - Indore
SEZ facility shall do away with capacity constraints and pave way for market share gains in existing products
and facilitate new launches. The domestic formulations segment is expected to rebound in FY13E with increasing
contribution from CVS, pain management segment while field force productivity shows an uptick.
Investment Rationale
Integrated Generic Play
IPCA has transformed itself from an API manufacturer to a fully integrated
formulation company. Formulations constitute 74% of the product mix with APIs
mainly captively consumed. The company follows a two pronged growth strategy
viz., emphasis on branded formulations with front end presence in fast growing
emerging markets and is a preferred supplier for generics (APIs/formulations) to
its partners based in the regulated markets and thus stays away from any patent
litigation.
Export Formulations – US Generics to gain traction
We anticipate contribution from export formulations to increase from 37% of
sales (FY11) to 48% in FY14E (implying 30% CAGR). The successful USFDA
inspection (pending approval) – Indore SEZ paves way for market share gains in
existing products (site transfers underway) and permits it to accelerate new
product launches post timely approvals. On the other hand, the promotional
markets (CIS, Asia etc.) are expected to grow by 26% over FY11-14E on the
back of new launches.Notably, funding commitment over AMFm programs and
increased off take of Artermether-Lumefantrine (AL) formulation ensures revenue
visibility in its institutional business.
Domestic Pharma business - Power Brands..!
IPCA holds 1.7% market share in the domestic Pharma market (MAT Dec’11).
Anti-malarials, CVS and pain management constitute more than 70% of the
domestic business. With rising MR productivity (domestic field force: 4000) and
growing contribution from CVS & pain management, we anticipate the company
to witness a rebound and register 15% growth in FY13E respectively.The proposed
National Pharmaceutical Pricing Policy (NPPP), if implemented in its current form,
will have negligible impact as IPCA’s products are not priced at the top-end.
Valuation
IPCA’s growth mantra revolves around creating a competitive position in
formulations by leveraging on its API goldmine. We expect acceleration in export
formulation revenues mainly led by the generics arm (US market in particular
post FDA approval to its Indore site) and sustained growth in its institutional
segment.Gradual recovery in domestic formulations hereon shall add to growth
momentum. At CMP, the stock trades at 12.9x FY12E and 11.6x FY13E earnings.
We recommend Buy on the stock with a revised target price of ` 402 (12x FY14E
EPS).

IPCA Laboratories– BUY ‘On a growth trajectory:: IIFL

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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.

IPCA's 3QFY12 performance was above estimates led by international formulations::Motilal oswal,

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IPCA's 3QFY12 performance was above estimates led by international formulations
Key highlights
 IPCA's 3QFY12 operational performance was above estimates with revenue growth of 32% YoY to INR6.15b
(est of INR5.5b), EBITDA growth of 66% at INR1.51b (est of INR1.11b) and PAT at INR639m.
 Revenue growth was led by strong 73% YoY growth in international formulation business. Branded generics
business grew by 45% YoY while pure generic business (Ex-institutional business) reported growth of 33% YoY.
Institutional business grew almost 3x to INR925m led by new tenders from WHO. However, domestic
formulation business reported muted growth of 5.7% YoY to INR1.87b.
 EBITDA grew by 66%YoY to INR1.51b while EBITDA margins expanded by 590bps YoY to 24.6% led by 1) strong
revenue growth, 2) improvement in gross margins and 3) favorable currency movement.
 Adjusted PAT remained flat at INR639m, despite robust operating performance, due to INR400m of forex
losses related to foreign currency loans and hedges.
Outlook and View
Expect 23% earning CAGR over FY11-13: We expect IPCA to clock FY11-13 PAT and EPS CAGR of 23% on the back of
20% revenue CAGR coupled with margin expansion. EBITDA is expected to record 29% CAGR for FY11-13. EPS
growth is lower than EBITDA growth due to lower other income and increased taxes. Further, despite INR5b capex
over FY12-13 (to sustain growth), the company is likely to record healthy return ratios and low gearing. The stock
is currently valued at 11.4x FY12E EPS and 9.5x FY13E EPS. The stock trades at 25-50% discount to its historic and
peer valuation. Reiterate Buy with target price of INR443 (14x FY13E EPS).

Ipca Labs has come out with subdued set of domestic numbers for Q3FY12:Sushil

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Ipca Labs has come out with subdued set of domestic numbers for Q3FY12 however, net
sales recorded strong growth with its international business compensating for the domestic
sluggishness. The company on the revenue front has registered a growth of 31.8% to Rs.
6148 mn with PAT being flat at Rs. 639.3 mn mainly on the back of a forex loss of Rs. 398.8
mn as against a forex gain of Rs. 112.1 mn in Q3FY11. The following are the key highlights of
the results which are summarized below:
Key Highlights of Q3FY12
Revenues grew by 31.8% YoY from Rs. 4663 mn in Q3FY11 to Rs. 6148 mn in Q3FY12.
The company’s domestic business which contributes ~37% to the sales of the company
registered a sluggish growth of 5.2% whereas the export business registered a strong
growth of 50.2%.
Domestic formulations continued its sluggishness for the second quarter running with it
recording a mere 5.7% growth from Rs. 1775 mn in Q3FY11 to Rs. 1876 mn in Q3FY12
mainly on account of lower business in the seasonal anti-malarial space, restructuring of
the marketing division undertaken during the past few months and industry wide
slowdown in acute therapies.
Export formulations increased to Rs. 2898 mn in Q3FY12 from Rs. 2097 mn in Q3FY11
mainly on the back of a strong growth of 312% in its institutional business, 33% growth
in its generic portfolio and branded portfolio recorded a growth of 45% to Rs. 615 mn.
On the Generics side, formulations grew on the back of a 45% growth in the US market
and approximately 35% growth in the Australia/NZL region combined whereas Europe
registered a 15% growth. On the Branded side, markets such as LatAm (140% yoy
growth), CIS (34% yoy growth) & W Africa (31% yoy growth) recorded good growth
whereas Middleast remained flat majorly from declines in Sudan & Yemen, where the
company has not been promoting sales due to political unrest.
Ipca clocked API revenues to the tune of Rs. 1244 mn, a growth of 4.7% yoy with the
export API posting a growth of 5.3% yoy, while the domestic API grew by 3.3% yoy on
the back of greater captive consumption.
Operating profit reported growth of 66.2% YoY from Rs. 909.9 mn in Q3FY11 to Rs.
1512.7 mn in Q3FY12; whereas on account of higher rupee average realization (Rs. 51.3
in Q3FY12 vs 45.0 in Q3FY11) and strong uptake in institutional business, the EBIDTA
margin came in at 24.6% v/s 19.5% in Q3FY11.
Reported Net Profit was flat amounting to Rs. 639.3 mn in Q3FY12 whereas margins
were at 10.4% mainly on the back a 93% YoY rise in interest costs, 223% jump in
depreciation and a forex loss to the tune of Rs. 398.8 mn. Excluding the forex loss
margins for the quarter came in at 16.9% vs 11.3% in Q3FY11. The company had
registered a forex gain of Rs. 112.1 mn in Q3FY11.
OUTLOOK & VALUATION
Ipca’s international branded business also joined the growth wagon this quarter along with
the generics and the tender business which have been more than compensating for the
dismal domestic business. We believe the revival in the domestic business will take time and
thereby we have altered out Q4FY12E and FY13E growth estimates as we build in slower
ramp in the domestic business and better than expected growth in the international
markets on the back of robust anti-malarial tender business and the expected Indore SEZ
USFDA approval (to drive generics business). However, we maintain our target price of Rs.
369 and our BUY rating on the stock.

Buy Ipca Laboratories; Target : Rs 358 ::ICICI Securities

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S t r o  n g   s h  o w ;   I n d o  r e   S EZ   n o d   t o   w a t c h   o u t …
Ipca Laboratories’ Q3FY12 results were a mixed bag. Revenues increased
31.8% YoY to | 614.8 crore above our expectation of | 571 crore mainly
driven by robust 73% growth in export formulations. The institutional
generic business increased to | 92.5 crore from | 22.4 crore in the
corresponding previous period. EBITDA margins rose by 510 bps YoY to
24.6% (our expectation: 23.5%) on the back of a favourable currency and
strong growth in the high margin institutional generic business. The net
profit posted muted growth of | 63.93 crore (our expectation: |83.7 crore)
on the back of forex losses of | 39.9 crore during the quarter. We are
maintaining our BUY rating on the stock.
ƒ Indore facility inspected by USFDA; expects approval in two months
Generic sales from the US grew 45% to | 41.1 crore during the
quarter despite capacity constraints at Silvassa. So far, Ipca has filed
25 ANDAs with the USFDA and received approval for 13. However,
it has launched only eight products in the US market due to capacity
constraints. USFDA has inspected the Indore facility and Ipca
expects approval for the facility in two or three months. Approval for
the facility would also trigger six ANDA approvals in the near term. It
is also in the process of filing for site transfer for other products.
ƒ Lower growth in anti-malarial drags overall domestic growth
The domestic formulation business posted marginal growth of 5.7%
to | 187.6 crore on the back of lower growth in the anti-malarial and
cardiac segment. However, the management has indicated that the
growth will normalise from Q4FY12.
V a l u a t i o n
Once again, the exports business has boosted the overall performance.
With the institutional business maintaining the traction, approval for the
Indore SEZ will be another booster for the company. We expect sales,
EBITDA and PAT to grow at a CAGR of 18%, 25% and 19%, respectively,
during FY11-13E. We have valued the stock at 12x FY13E EPS of | 29.8.
We will upgrade the multiple once the company gets approval and we
can see tangible benefits flowing in. We reiterate our BUY rating