Add Ipca Laboratories Ltd for the Target Rs.2,080 by Choice Institutional Equities Ltd
Growth Momentum Sustained; Margin Expansion Remains on Track
We project an improved growth trajectory from FY27E, supported by continued momentum in domestic formulations, robust export generics, improving performance across key geographies and gradual scale-up of Unichem. Domestic formulations continue to outperform the market in chronic therapies, with market share improving to 2.11% in Q2 from 2.09% in September 2026. We expect mid-teens revenue growth to sustain and project a steady margin expansion over FY27E–FY29E, supported by a favourable product mix, Unichem synergies and new launches. We roll forward our valuation to FY28– FY29E average EPS, arriving at a revised target price of INR 2,080. We retain our ‘ADD’ rating on the stock
Revenue Growth Continues, but Margin Misses Expectation
* Revenue grew 13.8% YoY / 4.4% QoQ to INR 29,099 Mn, (vs. CIE estimate of INR 29,136 Mn).
* EBITDA grew 23.6% YoY / 0.6% QoQ to INR 6,735 Mn; margin expanded 183 bps YoY but contracted 87 bps QoQ to 23.1% (vs. CIE estimate of 24.5%).
* Adj. PAT increased 20.9% YoY but declined 2.3% QoQ to INR 3,925 Mn (vs. CIE estimate of INR 4,443 Mn)
Growth Set to Accelerate across Formulations and API
We project both, formulations and API, to drive sustained growth, supported by domestic market share gains, strong export demand and continued portfolio expansion. Overall, we anticipate mid-teens revenue growth in FY27E.
* Formulations: We anticipate sustained growth in domestic formulations, driven by continued outperformance in chronic therapies. Export formulations growth should remain healthy, driven by strong performance in the branded business and broad-based double-digit growth across key geographies in the generics segment.
* API: We project gradual improvement in growth, supported by a healthy order pipeline at the loss-making subsidiary; the management indicated that performance should start improving from FY28E.
* Unichem: We expect Unichem to contribute incrementally to overall growth, supported by improving business performance across Europe, the US and Brazil. The US portfolio continues to scale up, while Brazil turned profitable in Q2FY27 after reporting losses in the first two quarters.
Margin Expansion sets Path towards 25–26%
We forecast gradual margin expansion, supported by a favourable product mix and improving Unichem profitability. While elevated freight cost continue to weigh on margin, we project FY27E EBITDA margin to remain around 23% and gradually improve by 100–125 bps annually over the next 2–3 years, in line with the management guidance.
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SEBI Registration no.: INZ 000160131
