IPCA Labs - Q4 FY21 Result Update - YES Securities

(Rating: BUY, TP: Rs2,750, Upside: 33%)

- A strong start to domestic business is likely in Q1 FY22 as anti-malarial, cough & cold rebound coupled with traction in pain management

- Costs would expectedly mark a comeback leading to lower margin in FY22 and thereafter gradually inching up to 26% in FY23.

- We reckon several margin drivers exist like 1) spare formulation capacities translating into operating leverage on sustained revenue growth 2) higher degree of API integration and scale upon operation of ~15% additional capacity between Ratlam and Dewas 3) healthy growth in branded business including domestic and Zerodol.

- We marginally cut estimates for FY22/23 by 2%/4% basis FY21 actual; albeit, retain BUY based on 28x FY23 EPS

- Reckon IPCA, being a largely domestic/branded play (~48% of sales from branded markets in FY22), deserves a premium to other mid cap peers. Key risk would be slow down in domestic business and corresponding hit to margin.

Shares of IPCA LABORATORIES LTD. was last trading in BSE at Rs.2062.6 as compared to the previous close of Rs. 2071.1. The total number of shares traded during the day was 17628 in over 2169 trades.

The stock hit an intraday high of Rs. 2115.5 and intraday low of 2034. The net turnover during the day was Rs. 36589990.

Source : Equity Bulls

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