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Ipca’s 4QFY26 EBITDA was ahead of our expectations (broadly in line with the consensus’). The beat was driven by higher overall sales, a marginally higher gross margin, as well as lower staff costs. The magnitude of gross margin and EBITDA margin expansion (ex-Unichem) was much higher (~330bps YoY) vs the reported figures. The top-line beat was primarily driven by higher generic sales (broad-based growth across markets, per the management). The commentary was positive on all fronts – double-digit growth outlook across segments (~12-13% consolidated sales growth in FY27; 10% growth in Unichem’s US portfolio), ~22% consolidated EBITDA margin (12-13% margin in Unichem), and a healthy US launch pipeline (Ipca + Unichem). Note that we had anyway not extrapolated Ipca’s recent gross margin performance, and our conservative consolidated EBITDA margin expansion assumptions (~170bps over FY26-28E) are largely a function of operating leverage gains in the standalone business and margin improvement in Unichem. We have, in the past, argued that with India formulations being a volume play, leverage gains from sustained volume-led, double-digit domestic growth will keep Ipca’s overall margin expansion targets within reach (~150bps per year on 10-12% topline growth). Despite concerns around the potential volatility in Ipca’s ex-India earnings, we note that the consensus’ FY27 EPS estimate has been remarkably stable over the last 2 years. We see a sharp price-value disconnect emerging post recent correction (even basis our conservative estimates). We broadly maintain our FY27/28 EPS estimates. We roll forward to Jun-28E earnings and introduce FY29 estimates. We retain BUY and raise our TP (now Jun-27) by ~6% to Rs1,800 from Rs1,700

Strong generics + branded performance; domestic formulation sales in line

Domestic formulations growth (12% YoY) was in-line, driven by acute as well as chronic outperformance. Growth in the branded business (14% YoY) was led by the CIS and African markets. Generics growth (39% YoY) was meaningfully ahead of expectations, aided by growth across various markets (EU, US, and Australia). Institutional sales declined 33% YoY (albeit ahead of our expectations) owing to ongoing funding pressures.

KTAs from the earnings call

1) Overall US sales (Ipca + Unichem) stood at ~Rs16bn in FY26 and witnessed a growth of ~14%. Unichem’s US business was flat in FY26 due to loss of market share in highvolume products. However, Unichem has started regaining market share and is expected to launch 5-6 products in the US in FY27.

2) Ipca is currently marketing eight products in the US, where it plans to launch an additional 6-8 products in FY27; it also has plans to launch 3-4 products per market in Europe and other generic markets.

3) The company aims to implement a 6-7% price hike in non-NLEM domestic products, to offset the higher raw material costs arising from an increase in packaging and solvent prices.

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