Motilal Oswal - MOSL: IPCA LABORATORIES (Buy)-Strong traction in DF/API; exports to pick-up gradually

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Motilal Oswal

Tushar Manudhane

MOSL: IPCA LABORATORIES (Buy)-Strong traction in DF/API; exports to pick-up gradually

IPCA LABORATORIES: Strong traction in DF/API; exports to pick-up gradually

(IPCA IN, Mkt Cap USD3.7b, CMP INR2173, TP INR2400, 10% Upside, Buy)

Opex on the rise due to higher RM/logistics cost

IPCA delivered a better than expected 1QFY22 performance, led by phenomenal growth in the Domestic Formulation (DF) segment (partly aided by COVID-19) and lower than expected YoY reduction in API sales. Despite the pandemic creating operational challenges, IPCA has been able to tide over issues related to manufacturing as well as distribution. This, supported with enhanced marketing efforts and strong brand recall, has led 25% YoY growth in the DF segment.
We have maintained our FY22E/FY23E EPS, factoring in a) higher offtake in the DF segment in 1QFY22, b) improving outlook in DF as well as exports, c) increasing pricing pressure in raw materials as well as logistics. We continue to value IPCA at 24x 12-months forward earnings to arrive at our TP of INR2,400. We remain positive on IPCA on the back of: a) volume-led outperformance in DF, b) cost competitive and consistent quality driving better business prospects in API, and c) better traction in the Institutional Anti-Malarial segment. We reiterate our Buy rating.

08/08/2021 10 EN

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Motilal Oswal

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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Analysts

Tushar Manudhane

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MOSL: IPCA LABORATORIES (Buy)-Strong traction in DF/API; exports to pick-up gradually

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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