IPCA Labs Sees All-round Miss On Lower Export API Revenues: Emkay

Broking firm Emkay Global has maintained a hold rating on the stock of IPCA Labs in its last report.

Weak segmental performance, especially exports

According to Emkay Global, export formulations revenue was down 19% yoy in Q3 due to a sharp decline in the institutional tender and generics businesses, partially offset by the branded business. Export API revenue was also down 20% yoy, as sartan API exports remained subdued due to the Azido impurity issue.

"On the contrary, domestic formulations revenue grew by 23% yoy on the back of strong performance across therapies. Domestic API revenue also increased by 16% yoy," the brokerage has said.
"We cut FY22E EPS by 5% to reflect the Q3 miss and softer Q4 expectations. We lower our FY23E/FY24E EPS by ~4%/3%. Though we continue to like Ipca's integrated business model, the lingering uncertainty on raw material cost pressures, demand softness in Europe, and sartan-related issues keep us on the sideline. The US FDA inspection timeline also remains unclear. We maintain Hold with a revised target price of Rs 1,060, implying a 21x P/E on our FY24E EPS," the brokerage has said.

According to Emkay Global, IPCA has guided for 20% revenue growth on a standalone basis in Q4. It expects UK and API businesses to remain subdued and the institutional business to post solid qoq growth. Gross margins are expected to remain stable in Q4, while seasonally lower domestic revenues are likely to impact operating profitability.