MOSL: IPCA LABORATORIES (Neutral)-Strong recovery in margins
​Ipca Laboratories: Strong recovery in margins
(IPCA IN, Mkt Cap USD1.0b, CMP INR536, TP INR550, 3% Upside, Neutral)
- 2QFY18 revenue was flat YoY at INR8.6b (~3% below est.). Domestic business was up 3% YoY. Gross margin expanded to 65.9% from 62.5% in 2QFY17. EBITDA rose ~16% YoY to INR1.5b (+5% beat), with the margin improving to 17.2% (+260bp YoY). EBITDA margin saw a negative impact of ~300bp from GST rollout. PAT rose 105% YoY to INR966m (+27% beat).
- Domestic business (ex anti-malaria) delivers strong growth: India formulation sales grew 5% YoY to ~INR4.2b. According to management, domestic branded business (ex anti-malaria) grew ~23-24% YoY. IPCA lost ~INR350-400m of sales v/s 2QFY17 due to lower Malaria-related sales. Management expects growth to bounce back to low-to-mid-teens in coming quarters, led by channel re-filling. International generic revenue fell ~18% YoY, mainly on weak UK/flat US business. Institutional business reported revenue of INR220m, as ~INR150 of sales got deferred to 3QFY18.
- Pick-up in institutional business from CY18E: IPCA announced that Global Funds has selected the company as its panel supplier. At peak, institutional biz revenue was ~INR4b. Adjusted for price deflation, peak business should be ~INR2.5b (v/s IPCA's current run-rate of ~INR1.2-1.3b). IPCA expects to reach peak sales in FY19. Two more approvals in anti-malaria are expected in FY19, which could add ~INR1.5b to top-line in two years.
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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