This Pharma Stock Is Given A ‘Buy' By ICICI Direct For 21% Gains In 12 Months

ICICI Direct has recommended a 'Buy' on the scrip of IPCA Laboratories for 12 months period with a target price of Rs. 2490. This implies an upside of 20.69 percent from the current price level of Rs. 2063 per share.

Buy IPCA Laboratories for a price target of Rs. 2490

The fully integrated pharma entity manufactures more than 350 formulations and 80 APIs. In Fy21, exports accounted for 50% of the company's revenues. The company's leading therapeutic domains cover pain management, cardiovascular and anti-diabetics, anti-infectives, anti-malarials that on a whole contribute to 75% revenues.

Q2FY22 Results:

Despite the challenges the company reported a decent September quarter of Fy22 period. Sales came in higher by 13.5% YoY to Rs. 1544.4 crore. EBITDA also registered a surge of 1.5% YoY at Rs. 365.6 crore
with margins at 23.7%.Furthermore, PAT was at Rs. 250.2 crore (down 6.3% YoY).

Target Price and Valuation:

We value Ipca at Rs. 2490 i.e. 26x P/E on FY23E EPS. "We Maintain BUY due to good traction in domestic formulations and sustainable growth amid some margin pressure in medium term", says the brokerage.

Key triggers for future price performance:
• Incremental growth in other therapies (excluding malaria), especially non-communicable diseases like pain management, cardio-diabetology, etc, the
overall portfolio is poised for steady growth.
• Sustained traction from branded and generics exports sales with a revival in EU is likely to mitigate the US void.
• Commissioning of Devas plant and additional capacities from Ratlam.
• US traction will take longer due to USFDA import alerts for the Ratlam facility that is the only API source for Silvassa and Pithampur formulations.

 

 

Alternate Stock Idea:

Besides Ipca, in the healthcare segment, ICICI Direct likes Ajanta Pharma. "Ajanta Pharma is a focused player in branded, which constitutes appx.70% of overall sales that are spread across geographies including India. Focus is launching maximum number of first time launches with new drug delivery system (NDDS)", says the brokerage house. The company recommends buying Ajanta with target price of Rs. 2500, implying returns of 18 percent as against the last traded price of Rs. 2120.

Disclaimer:

The above stock has been picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.