IPCA Labs - 2QFY2016 Result Update - Angel Broking

For 2QFY2016, IPCA Laboratories (IPCA) posted in line sales while the net profit came in lower than our estimates. The company posted a 4.7% yoy decline in sales to Rs. 739cr V/s Rs. 750cr expected, on back of domestic and exports posting a dip of 2.3% yoy and 6.9% yoy, respectively. On the operating front, the EBITDA margin came in at 10.6% V/s 11.4% expected and V/s 16.7% in 2QFY2015, owing to lower than expected sales. Thus, the Adj. net profit came in at Rs. 31cr V/s Rs. 41cr expected and V/s Rs. 68cr in 2QFY2015, a yoy dip of 54.3%. While the current performance of the company is being impacted due to its key plants being under the USFDA scanner, we believe once out of it, the company can bounce back to its normalized ROE of 25%. Thus, we maintain our Buy on the stock.

Results lower than expectations: The company, posted an 4.7% de-growth in sales to end the period at Rs. 739cr V/s Rs. 750cr expected and Rs. 775cr in 2QFY2015, on back of domestic and exports posting a dip of 2.3% and 6.9% respectively. In domestic markets (Rs. 364cr), posted a dip of 2.3% yoy, mainly on back a tepid formulation sales (Rs. 331cr), a yoy growth of 0.9%.In exports (Rs. 375cr), a yoy dip of 6.9%, on back of dip in formulation exports (227cr) a dip of 25.7% yoy, while API exports (Rs. 147cr) posted a yoy growth of 52.9%. On operating front, the EBITDA margins came in at 10.6% V/s 11.4% expected V/s 10.0% in 2QFY2015, on back of lower than expected sales during the quarter. Thus, the Adj. net profit came in at Rs. 31cr V/s Rs. 41cr expected and Rs. 68cr in 2QFY2015, a yoy dip of 54.3%.

Outlook and Valuation: We expect net sales to post a 12.0% CAGR to Rs. 3,909cr, and EPS to register a 17.9% CAGR to Rs. 28.0 over FY2015–17E. The company's financials will be impacted by the USFDA import alert on the Ratlam, Indore and Silvassa facilities. For 2HFY2016, the Management has given a guidance of 16% yoy growth in sales. We recommend a Buy on the stock, given the valuations.

Shares of IPCA LABORATORIES LTD. was last trading in BSE at Rs.743.25 as compared to the previous close of Rs. 723.55. The total number of shares traded during the day was 24086 in over 1233 trades.

The stock hit an intraday high of Rs. 753.4 and intraday low of 724. The net turnover during the day was Rs. 17963696.

Source : Equity Bulls

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