Ipca Laboratories (Q4 FY12)

India Infoline News Service | Mumbai |

The company reported EBITDA margin of 19.9% v/s 20.5% in Q4FY12

CMP Rs324, Target Rs382, Upside 17.9% 
  • In line with our estimates, Ipca reported Q4 FY12 revenue growth of 17% yoy to Rs5.6bn. The growth was mainly driven by better than expected API segment (grew by 41% to Rs1.6bn) and domestic formulation (grew by 15% yoy to Rs1.5bn). Slowing tender business and new packaging norm at EU took a toll on export formulation. Overall total revenue from formulation grew by 9% yoy to Rs3.9bn and API segment grew by 41% yoy clocking revenue of Rs1.6bn. The current quarter also includes forex gain of Rs51.4mn.
  • In exports, generic formulation sales missed our estimated on the back of lower contribution from EU (down by ~31%) led by policy change in packaging. Tender business also impacted due to new legislations (down by 8% yoy). But, promotional markets performance was strong (60% yoy growth) and key markets viz CIS, Africa and south East Asia did well. There was a substantial spurt in other operating income (led by consolidation of Tonira) in this quarter; further defending declining margin.
  • Ipca disappointed us at margin front. The company reported EBITDA margin of 19.9% v/s 20.5% in Q4FY12. EBITDA margin declined 470bps qoq largely led by higher employee expenses and business mix (higher contribution of API Business). The impact was largely contributed by Tonira pharma consolidation. Tonira is a mainly export API company and its merger had effect of incremental ~Rs395mn sales and net loss of Rs18.5mn. overall Net margin declined by 401 bps yoy contributed by incremental depreciation of Indore SEZ and other higher fixed cost.  
  • We believe now company is well positioned to report better margin as the business mix is expected to improve with Indore SEZ approval. Management expects approval in two 2 months. The company expects to receive approval in two months post that 6 ANDA approvals are expected and to mitigate capacity constraints Ipca would start filing for site transfers. The company expects peak sales of ~ RS4bn from this unit. Currently the total ANDA filings are 25 of which 12 are commercialized. 8-10 new ANDA filings are planned for FY13.
  • Ipca has consistently grown above 20% in the last 5 years. We expect robust performance to continue. Ipca has a strong franchise in Indian branded business coupled with high margin exports. We expect 20% CAGR in revenues and PAT CAGR of 23%. We believe Ipca is currently attractively valued at 8.7x of FY14E earnings. We maintain our BUY rating with a target price of Rs382.
Results Table
(Rs mn) Q4FY12 Q4FY11 %yoy Q3FY12 % qoq
Net Sales 5,611 4,785 17.3 6,148 (8.7)
(Inc)/Decrease in stock (443) (107) 313.9 (42) 957.0
Material consumption (2,319) (1,728) 34.2 (2,134) 8.6
Purchase of Traded Goods (317) (244) 30.3 (249) 27.2
Staff Cost (855) (609) 40.2 (804) 6.3
Other Expenditure (1,447) (1,222) 18.5 (1,490) (2.9)
Operating Profit 1,117 1,089 2.5 1,513 (26.2)
OPM (%) 19.9 20.5 (63) bps 24.6 (470) bps
Depreciation (142) (147) (3.3) (181) (21.6)
Interest (111) (145) (23.2) (108) 2.7
Other Income 37 135 (72.7) 39 (6.3)
PBT 900 933 (3.5) 1,263 (28.7)
Forex (Gain)/Loss (51) (62) (17.4) 399 (112.9)
Income Tax (186) (136) 36.8 (225) (17.3)
PAT 766 859 (10.8) 639 19.8
Effective tax rate (%) 19.5 13.6 587 bps 26.0 (648) bps
Adjusted PAT 727 811 (10.5) 946 (23.2)
Net Margin % 12.9 17.0 (401) bps 15.4 (245) bps
Annualised Diluted  EPS 23.1 21.8 5.9 30.1 (23.2)
Source: Company, India Infoline Research
 
Revenue Break-up
(Rs mn) Q4FY12 Q4FY11
 

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