Edelweiss Research

IPCA Labs (Buy)

CMP: Rs 447.90

Target: Rs 582

Post corrective actions, domestic business (ex-malaria) is recovering, led by higher field force productivity and better retention rates while key brands such as Zerodol and HCQS continue to do well, posting 35-40 per cent growth. We expect 16-17 per cent growth in FY13, despite lower anti-malarial demand, which limits downside risk to our estimates. Post the FDA nod for Indore SEZ, IPCA plans to aggressively scale up its US operations. IPCA plans to step up filings which could add $60-70 million sales to the current base. IPCA’s strong execution track record and focus on profitable investments render higher earnings growth and the best in class ROEs/ROCE. It is likely to see an expansion in multiples from the current average of 10-12x to 14-16x as earnings are estimated to cross Rs 500 crore by FY14.

(This article was published on September 13, 2012)
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