Tue, 2 September 14,07:17 IST

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Multi Baggers

Hem Securities

12.00 AM Aug 26th 2013

Ipca Labs

BSE ID : 524494     NSE ID : IPCALAB

RECOMMENDED PRICE 623.30

PEAK FROM RECO 906.90 45.50%

CURRENT PRICE 750.00 20.33%

Ipca Laboratories is vertically integrated and produces finished dosage forms and Active Pharmaceutical Ingredients. We initiate a 'BUY' on the stock with a target price of Rs 780 with the medium to long term investment horizon.

Ipca Laboratories

Ipca Laboratories is vertically integrated and produces finished dosage forms and Active Pharmaceutical Ingredients. Exports to over 120 countries, now account for nearly 61% of its income.

The company has posted highest strong quarterly performance for the quarter ending June 2013. The Revenues from operations on consolidated basis increased by around 26% at Rs.805.56 crores vs Rs.637.61 crores y-o-y. Operating profit jumped about 21% at about Rs.171.02 crores as against Rs.141.78 crores in the previous quarter. Overall R&D cost in this quarter was around Rs.35.16 crores which includes about Rs.3.14 crores of capital expenditure and Rs.32 crores of revenue expenditure. As a result of it operating profit margins declined about 101bps at 21.23%. The net profit skyrocketed by 67% at Rs.71.77 crore for the quarter as compared to Rs.42.98 crore. EPS for the quarter stood at Rs.5.69. The company incurred a capital expenditure of around Rs.47 crores in the quarter.

Total revenue from formulations business grew by 29% at Rs.580.31 crores as against Rs.448.69 crores in Q1FY13. Revenue from domestic branded formulations grew by 12% at Rs.250.36 crores from Rs.224.18 crores y-o-y and export formulations revenues surged sharply by 47% at Rs.329.95 crores vis--vis Rs.224.51 crores.

Revenues from API moved up by 17% at Rs.212.22 cr. as compared to Rs.181.56 cr. in Q1FY13. Domestic API revenues grew 16% at Rs.45.63 cr vs Rs.39.34 cr. y-o-y. Export API revenues jumped by 17% at Rs.166.59 cr. from Rs.142.22 cr. in Q1FY13.

Valuation

With robust product pipeline, increasing market share in key products; revival of ani-malaria segment revenues; Ipca Labs Ltd. revenue stream looks visible. Approval of Indore SEZ would be a growth driver in near term. We believe the company is trading at an attractive valuation at 17.21x and 13.95x of FY14EPS of Rs.36.21 and FY15EPS of Rs.44.68. We initiate a 'BUY' on the stock with a target price of Rs.780 (appreciation of about 25%) with the medium to long term investment horizon.

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Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

IPCALab_HemSec_Multibagger.pdf

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