MOSL: IPCA LABORATORIES (Buy)-Cost headwinds receding-Generics/API outlook promising
Ipca Laboratories: Cost headwinds receding; Generics/API outlook promising
(IPCA IN, Mkt Cap USD1.7b, CMP INR933, TP INR1145, 23% Upside, Buy)
- Sales were up 6.5% YoY at INR8.3b (our estimate: INR9.1b) in 4QFY19, led by higher Branded generics (domestic/exports) and API sales. Domestic formulation (DF) sales increased 10% YoY to INR3.6b (58% of overall sales). Branded exports grew 24% YoY to INR945m, while API sales were up 10% YoY at INR2.1b. However, growth was partly dragged by lower Generics sales (-9% YoY to INR1.2b).
- Gross margin expanded 45bp YoY to 68% due to a better product mix. Reduced remediation cost (INR40m v/s INR100m in 4QFY18) and better operating leverage led to lower other expenses (-520bp YoY). As a result, EBITDA margin expanded at an even higher rate of 590bp YoY to 20.9% (our estimate: 17.4%). EBITDA was up 49% YoY at INR1.7b (our estimate: INR1.5b), while PAT increased 71% YoY to INR1b (our estimate: INR873m). For FY19, sales/EBITDA/PAT grew 14%/23%/22% YoY to INR37.7b/INR7.1b/INR4.6b.
Ipca Laboratories is engaged in the manufacture, sale and export of pharmaceuticals and pharmaceutical formulations in the form of tablets and capsules, orals and liquids, injectables, basic drugs and intermediates, and psyllium husk. As of Mar 31 2003, Co. operated 4 manufacturing facilities in Ratlam, Indore, Kandla and Athal. Co. also maintained a corporate office, an international division, and a research and development center in Mumbai.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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