IGI Logo

Muted Growth Outlook Across Segments

Although the company’s domestic formulations business is expected to grow ahead of the market (IPM), we believe overall growth for the formulations segment will remain subdued due to continued pricing pressures in generics, volatility in institutional sales, and limited high-impact launches in the US. API growth is also likely to stay muted, given the high export dependency and ongoing global supply chain disruptions. EBITDA margins may improve by ~100 bps, supported by a higher contribution from chronic therapies. Given this, we revise earnings our estimates downward by 15.9%/14.6% for FY26E/FY27E. We continue to value the stock at 27x FY27E EPS and arrive at a revised target price of INR 1,350 (earlier: INR 1,478), and downgrade our rating to REDUCE.

Strong YoY Operating Growth; PAT Impacted by Exceptional Losses

 * Revenue grew 10.5% YoY / remained flat QoQ at INR 22.5 Bn (vs. consensus estimate: INR 22.2 Bn).

 * EBITDA rose 33.2% YoY / declined 7.4% QoQ to INR 4.3 Bn (vs. consensus: INR 4.1 Bn); margins expanded 325 bps YoY / contracted 154 bps QoQ to 19.1% (vs. consensus: 18.7%).

 * PAT grew 13.8% YoY / declined 72.7% QoQ to INR 678 Mn (vs. consensus estimate: INR 2.2 Bn).

 * Exceptional items stood at INR 2.05 Bn due to impairment in associate as well as a subsidiary.

API Segment Recovery Gradual; Growth to Remain in High Single Digits: The API segment, which had been facing pricing headwinds post-COVID highs, has now seen some stabilization with modest improvement expected by FY26-end. However, we believe that given ~70% of API revenue comes from exports, this might get affected due to global supply chain disruptions. Management expects a gradual recovery for the segment, especially from RoW and semi-regulated markets. We expect the segment to grow in only high single digits over the next two years, driven by volume.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131