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Chronic and generics carry the growth, freight caps the margin

1. Domestic growth is volume-led and chronic-heavy, which we see as durable. Chronic grew ~20% against a ~17% market, and Zerodol is growing 8-9% on volume, keeping 12-13% domestic growth well supported

2. Generics growth is broad-based across five geographies, but institutional is set to fall ~21-33% YoY in 2HFY27. We therefore expect FY27F growth to land mid-range in the 14-16% guidance, not at the top.

3. The margin path is intact but freight is the swing factor. Unichem's margin slipped to ~11.3% on a ~Rs300mn freight hit, so we see the guided 100-125bps annual margin gain as achievable but not beatable near term.

Chronic and Zerodol keep domestic growth ahead of the market

a) Domestic formulations grew 14% YoY to Rs11.57bn in 2QFY27 and ~13% in 1HFY27, ahead of the 12-13% guidance. Market share rose to 2.11% from 2.09%, with the IQVIA rank holding at 16.

b) The quality of growth is better than the headline suggests. Chronic grew ~20% against a ~17% market, while acute grew ~11%, only in line with the market, as anti-malarials declined and anti-bacterials and cough & cold barely grew.

c) Pain management, Ipca's largest franchise, grew ~16% YoY to ~Rs6.28bn in 2QFY27 and ~14% to ~Rs12.16bn in 1HFY27. Zerodol has crossed Rs15bn as an umbrella brand and is now the fourth-largest brand in the IPM, with Zerodol-SP rising to rank 8 from 11.

d) Management splits Zerodol's growth into 8-9% volume and 4-4.5% price, and expects 14-15% growth for the next three to four years. We find this credible, as pain grew ~13% in 1QFY27 and ~16% in 2QFY27 and domestic growth has picked up from ~10.5% in FY26.

e) The main risk is price. A 4-4.5% price contribution is high for a mature brand, and any price control or trade generic pressure would cut it. The acute drag should fade, though, as anti-malarials are now only ~1% of sales.

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