MOSL: IPCA LABORATORIES (Buy)-Product mix improves, likely to deliver better return ratios
Ipca Laboratories: Product mix improves, likely to deliver better return ratios
(IPCA IN, Mkt Cap USD1.3b, CMP INR753, TP INR910, 21% Upside, Buy)
- Growth primarily driven by exports: IPCA’s revenue grew ~15% YoY to INR10b (our estimate: INR9.6b), led by International generic (~29% of sales; +23% YoY to INR2.9b) and API (~23% of sales; +16% YoY to INR2.3b) businesses. Domestic business (~48% of sales) grew by ~10% YoY to INR4.7b. Gross margin expanded 270bp YoY (+110bp QoQ) to 68.6%, led by a change in the product mix. EBITDA margin improved ~260bp YoY to 20.4%, led by gross margin expansion and lower employee expense (-120bp YoY), partly offset by higher other expense (+140bp YoY). Adj. PAT, thus, increased 48% YoY to INR1.5b (our estimate: INR996m). In 1HFY19, sales/EBITDA/PAT grew by 17%/99%/211% YoY to INR15.8b/INR3.4b/INR2.4b.
- Earnings call takeaways: (1) Reduced share of anti-malaria in DF, lower share of UK business and passing of price increase in API segment aided gross margin expansion. (2) Incurred remediation-related cost of INR250m/INR310m in 2QFY19/1HFY19. (3) Incurred ANDA-related expense of INR60m. (4) Expects to spend INR300-350m in 2HFY19. (5) Russia business was impacted by currency headwinds.
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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