IPCA Laboratories Ltd. - GEPL Capital

Q3FY12 – Good show; PAT flat due to forex losses; but no cause for concern

- IPCA Laboratories Ltd. (IPCA) reported an impressive 31% Y-o-Y growth in net sales at Rs6,148 mn in Q3FY12 against Rs4,664 mn in Q3FY11. This was led by a robust 50% growth in export income at Rs3,810 mn in Q3FY12 against Rs2,534 mn in Q3FY11.

- EBITDA at Rs1,513 mn was 66% higher on a Y-o-Y basis due to moderation in raw material cost from 41% of sales in Q3FY11 to 38% of sales in Q3FY12. Staff cost as a percentage of sales too, reduced from 13.9% in Q3FY11 to 13.1% in Q3FY12. EBITDA margin improved from 19.5% in Q3FY11 to 24.6% in Q3FY12.

- Overall, PAT remained flat at Rs639 mn in Q3FY12 against Rs640 mn in Q3FY11. This was mainly due to forex loss of Rs399 mn in Q3FY12 against a forex gain of Rs112 mn in Q3FY11. Excluding forex impact (loss and gain respectively for Q3FY12 and Q3FY11), PAT nearly doubled to Rs1,038 mn in Q3FY12 against Rs527 mn in Q3FY11. Reported net profit margin declined to 10.6% in Q3FY12 against 13.8% in Q3FY11.

Result Highlights

Buoyant exports and formulations push up topline

Overall formulation business registered an impressive 39% Y-o-Y growth to Rs4,774 mn in Q3FY12 against Rs3,446 mn in Q3FY11. Export formulations, which comprise 61% of total formulations sales, grew strongly at 73%. Overall, exports registered 50% Y-o-Y growth.

Anti-malaria portfolio under pressure

The anti-malarial business is expected to remain under pressure due to low incidence of malaria this year. Incidences of Malaria Falciparum were down 16%. Management expects the business to clock Rs3,000 mn for FY12E and Rs3,600 mn – Rs3,700 mn for FY13E.

Despite flattish PAT growth, outlook remains encouraging

Despite reporting flat PAT of Rs639 mn in Q3FY12 against Rs640 mn in Q3FY11, IPCA looks poised for good growth going forward. It has 13 ANDAs with the USFDA pending approval and also 60 DMFs. Although Indian business growth has looked sluggish in this quarter, IPCA has performed strongly in almost all other geographies. Indian business is also expected to be on the growth path soon as the seasonal cycle picks up.

Valuation & viewpoint

At the CMP of Rs.299, IPCA is trading at 11x its FY13E consensus earnings estimate. The stock has shown good momentum over the past 3 months rising as much as 18% versus a 3% decline for the SENSEX. Buoyed by strong numbers and an exciting pipeline of products, we expect IPCA to maintain the growth momentum.

Source : Equity Bulls

Keywords