Buy Indoco Remedies Ltd For Target Rs. 405 - ICICI Direct
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Weak set of numbers, outlook upbeat...
About the stock: Indoco manufactures and markets branded formulations and APIs for the domestic and export markets. In domestic formulations, the company has a major presence in acute therapies.
• Domestic formulations accounted for 43% of revenues
• Formulation exports accounted for 51% (regulated markets: 38%) of revenues while APIs contributed ~5%
Q4FY23 Results: India and US missed estimates, dragged numbers.
• Revenues grew 4.5% YoY to | 427 crore
• On operational front, EBITDA de-grew ~21% YoY to | 64 crore with margins at 14.9%
• PAT for Q4 was at | 28 crore
What should investors do? Indoco’s share price has grown at a CAGR of 17.2% over the past three years.
• We maintain BUY on the back of 1) Steady domestic business visibility, 2) Strong exports guidance and 3) Expectation of margins improvement
Target Price and Valuation: We value Indoco Remedies at | 405 i.e. 15x P/E on FY25E EPS of | 27.1
Key triggers for future price performance:
• Restructuring exercise for improvement in MR productivity and therapy calibration is likely to yield productive growth in Indian formulations
• Resumption of sales from Goa Plant 1 to US post VAI status and Renewal of Allopurinol contract in Germany to aid growth
• Indoco will benefit with market share gains in covered markets domestically while export formulations are likely to grow with a strong pipeline in speciality dosages, visible launch schedule and strong order book
• Niche ANDA filings in ophthalmic, injectable and controlled release OSDs in the US to scale up the US share from a low base
Alternate Stock Idea: Apart from Indoco, in healthcare coverage we like Ajanta.
• It is mainly into domestic as well as exports formulations with focus on launching maximum number of first time launches
• BUY with a target price of | 1520
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