Broking firm, Motilal Oswal has placed a buy call on the stock of IPCA Labs for long-term investing.
On a strong footing
According to Motilal Oswal, IPCA has delivered 12% sales CAGR in the DF segment v/s India Pharma market (IPM)'s growth of 7% over FY18-21, with 26% YoY growth in 9MFY22.
"Almost 68% of the growth was led by volume, 20% by price and the remaining by new launches for 12M ending Feb'22. The shift in doctors' inclination towards prescribing Aceclofenac (than diclofenac) along with IPCA's superior marketing efforts is primarily fortifying its ZERODOL brand (26% of DF sales as per AIOCD) and its combinations," the brokerage has said.
API, UK business to pick-up
According to Motilal Oswal, the process of revalidation related to azido impurities for Losartan at industrial level had a toll on IPCA's API business as well. Its API sales declined 13% YoY in 9MFY22.
IPCA has revalidated the process and its product is within the required specification as far as the azido impurities are concerned. However, the regulatory re-filing by its customers and subsequent approval would take 3-5 months before its Losartan-related API business return to normalcy.
Outlook remains positive
"We have cut our FY23E/FY24E earnings by 8%/6%, respectively, for IPCA to factor in: a) the moderation in API business, b) slower off-take in the UK business and c) adverse macro situation in CIS countries. We value IPCA at 24x 12M forward earnings to arrive at our target price of Rs 1,200. We remain positive on IPCA backed by its strong brand franchise in DF and ongoing capacity addition initiatives to cater to the future demand in the API segment. Maintain BUY. Our target price implies 18% potential upside from current level," the brokerage has said.
The stock has been picked from the brokerage report of Motilal Oswal. 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.