Prabhudas Lilladher has given Accumulate recommendation for Ipca Laboratories with a target price of Rs. 1000 in its research report issued on Sep 29, 2022
Prabhudas Lilladher’s research report on Ipca Laboratories
We believe earnings are likely to remain muted over FY21-23E impacted by high COVID base, weak margins and one time issues related to UK and export API business, resulting in stock underperformance. However, in our recent management interaction, the company highlighted that margins are likely to recover as revenues scale up with easing of certain overheads and raw material prices. We expect 31% EPS CAGR over FY23-25E vs 20% EPS decline over FY21-23E on back of strong domestic formulation business (45% of total sales), which continues to outperform IPM. Additionally, export business is also on a gradual recovery mode with UK and export API business expected to normalize by Q4F23. At CMP, stock is trading at 22x FY24E and 18x FY25E P/E. Upgrade to ‘Accumulate’.
Outlook
We reduce our FY23/FY24 EPS estimates by 6% and introduce FY25 EPS at Rs49/share, even as we upgrade IPCA Lab (IPCA) to ‘Accumulate’ from Hold at TP of Rs 1,000 (earlier Rs 1,010) based on 22x Sept 2024E earnings.