EUR 120.00 For Business Accounts Only

MOSL: IPCA LABORATORIES (Buy)-A dose of growth

Ipca Laboratories: A dose of growth

(IPCA IN, Mkt Cap USD2.5b, CMP INR1426, TP INR1660, 16% Upside, Buy)

 

We recently met management of Ipca Laboratories (IPCA) to understand the growth prospects in the business and ascertain the impact of the ongoing coronavirus outbreak-led supply disruption.

• IPCA appears well positioned to deliver strong earnings CAGR of 26% over FY19-22, led by its strong outperformance in Domestic Formulation (DF), improved prospects in API and revival in International Generics.
• We value IPCA at 22x 12M forward earnings to arrive at a price target of INR1,660. Superior execution, lower financial leverage and healthy return ratios reinforce our positive stance on the company. Reiterate Buy.

 DF – on a robust growth trajectory

• IPCA remains confident that it will outperform industry with 14-15% CAGR in DF segment over the next three years. The plan to add 250-300 MRs over the next 6-9 months emphasizes its incessant focus on this segment.
• Pain management prospects appear particularly promising, with IPCA comfortably surpassing industry growth (8-10%) with a CAGR of 17% over FY14-19 and 20% growth in 9MFY20. Growth in this therapy is mostly volume driven (70-75%), implying its sustainability over the next 3-4 years. IPCA plans to add two more SKUs in pain management in FY21.
• The Zerodol group of brands has reached a revenue size of ~INR4b with potential to double over 3-4 years. While Zerodol brand is not included under NLEM, the price risk is minimal as product pricing under this brand is already lower than peers.
• IPCA has done well in rheumatoid arthritis and enhancing its efforts in terms of training and educating doctors for disease modifying anti-rheumatic drugs. Specifically, nearly 230MRs are dedicated for this therapy with intensive patient engagement.