Add Ipca Laboratories Ltd For Target Rs.1,935 by Choice Institutional Equities Ltd
Growth and Margin Recovery Support Stronger Outlook
We project an improved growth trajectory from FY27E, supported by scale-up in synergies, stronger demand, product launches and a favourable product mix. Overall revenue is anticipated to grow in the mid-teens in FY27E. EBITDA margin is also expected to improve from 20% in FY26 to 23% in FY27e, with a long-term target of 25–26%. Capex remains focussed on expanding select facilities to meet increasing demand from Europe. We revise our FY27E/FY28E estimate upwards by 6.9%/11.8% and continue to value the stock at 25x FY28E EPS. Our revised TP stands at INR 1,935, with a maintained ‘ADD’ rating
Strong Revenue Growth and Significant Margin Expansion
* Revenue grew 20.8% YoY / 16.7% QoQ to INR 27,881 Mn, ahead of CIE estimate of INR 27,106 Mn.
* EBITDA grew 60.8% YoY / 38.4% QoQ to INR 6,695 Mn; margin expanded 598 bps YoY / 375 bps QoQ to 24.0% (vs. CIE estimate of 21.0%).
* Adj. PAT increased 72.3% YoY / 20.3% QoQ to INR 4,019 Mn (vs. CIE estimate of INR 3,389 Mn).
Growth Set to Accelerate across Formulations and API
With spillover of institutional shipments originally scheduled for March, strong generic sales in Europe, robust API growth and continued scale-up of Unichem, IPCA delivered strong growth during the quarter. We believe the company is on track for a stronger growth trajectory from FY27E, driven by both, formulations and API.
* Formulations: Growth will be supported by continued momentum in the domestic business, mid-teens growth in the US with 7–8 product launches annually, further scale-up of Unichem and stable institutional demand.
* API: Growth, supported by stronger demand in the US, is projected to be led by exports rather than the domestic market.
Margin Expansion sets Path towards 25-26%
EBITDA margin saw a healthy expansion, reaching 24% in Q1FY27. While quarterly margin may vary, we project FY27E EBITDA margin to remain around 23%, with a long-term target of 25–26%. Margin expansion should be driven by a favourable product mix, Unichem synergies, biotech launches and stronger API margin.
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