1   

                  1  

   

                       

Analys

   

                   

st: Ajoy m

 

mukherje

 

ee | amuukherjeee@microosec.in

 

 

 

 

 

 TABLE OF CONTENTS:

TOPIC Page NumberInvestment Highlights…………………………………………………. 01-01Company Overview……………………..……..……………………… 02-02Business Overview…………………………………………………… 02-06Industry Overview …………………………………………………….. 07-07Investment Rationale …………………………………………………. 08-10Peer Group Comparison & Key management …………………….. 11-11Strategy of inorganic growth – Acquisitions ………………………… 12-12Future Growth Drivers ………………………………………………… 13-13Financials………………………………………………………………. 14-16Valuation & Risks …………………………………………………….. 16-16Disclaimer……………………………………………………………… 18-18

 

                                                                                            1  April 10, 2014

We rate Ipca Laboratories Ltd. a ‘BUY’. Our rating underpins the company’s strong management, its strategy of focusing on global generic and API business and R&D activities. Company is also focusing on formulation business & therapeutic coverage especially in the fast growing lifestyle related segment. Investment Highlights

Stable Growth to continue in all segments; Continent - wise exports to remain strong: The Company is expecting continuous growth in all segments like API/Intermediates, Branded formulation, Generic formulation. It also expects exports to remain strong with factors like a) its products now being exported to over 110 countries across the globe and b) growing by ~20% (Average) in every continent mainly Asia, America, and Africa.

Market leader in Anti-malarial Drug: Ipca lab is India’s market leader in Anti-malarial drug across all dosage forms. Almost 18% of current turnover comes from Anti-malarial i.e. US$ 60 million. Also, it has a dedicated Anti-Malarial marketing division in India with a special task force of 500 people.

Ample opportunities to grow in export business: Though in the world pharmaceutical market, India has a share about 3-4% by value, India is recognized as one of the leading global player with a large no. of Drug Master File (DMF) and Active Pharmaceuticals Ingredients (APIs) and formulation with manufacturing facilities approved by regulatory authority of developed countries. Hence, Ipca Lab, which comes among the top 10 pharmaceutical companies in India has ample opportunity to grow its export business which has been already growing by a CAGR of 20% in last 5 years.

Consistent growth in EBITDA margin, ROE: Ipca Lab’s continuous growth in EBITDA margin & we expecting that it will be continue. We are also expecting that ROE & EPS will increase as past history. Company has been increasing its equity dividend from 80% to 200%. We expect the company to continue its healthy dividend payments in the upcoming years as well. Ipca Lab. Ltd. – Financials at a glance (all data in INR Crores unless specified) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ipca Lab Ltd. – Growth to continue….

BUY Sector – Pharmaceuticals  

Analyst

Analyst: Ajoy Mukherjee

amukherjee@microsec.in

Source: Company, Bloomberg, Microsec Research

Promoter and

Promoter Group45.89%

DII11.97%

FII25.42%

Non Institutions

16.72%

Shareholding

94.75

104.75

114.75

124.75

134.75

144.75

154.75

164.75

174.75

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CLOSE(Ipca Laboratories Ltd) CLOSE(SENSEX)

BSE Code 524494

NSE Code IPCALAB

Bloomberg Ticker IPCA IN

Reuters Ticker IPCA.BO

Face Value (INR) 2.00

Equity Share Capital (In INR Crs) 25.24

Average P/E 26.5x

Beta vs Sensex 0.31

Average Daily Volume 167,914

Dividend Yield 0.5%

PEG Ratio NA

STOCK SCAN

Particulars FY2011A FY2012A FY2013A FY2014E FY2015E

Net Sales 1,883.00 2,359.00 2,813.00 3,319.00 3,983.00

Growth (%) 20.28% 25.28% 19.25% 17.99% 20.01%

EBITDA 428.00 473.00 574.00 714.00 864.00

EBITDA Margins (%) 22.73% 20.05% 20.41% 21.51% 21.69%

Net Profit 262.00 276.00 324.00 435.00 522.00

Net Profit Margins (%) 13.91% 11.70% 11.52% 13.11% 13.11%

Net Profit Growth (%) 28.43% 5.34% 17.39% 34.26% 20.00%

EPS 20.87 21.89 25.71 34.45 41.38

BVPS 83.66 99.41 123.12 153.57 190.58

P/E 14.42 15.22 20.54 24.24 20.18

P/BV 3.61 3.36 4.28 5.45 4.41

RoE 27.0% 24.0% 23.0% 24.9% 24.0%

EV/EBITDA 10.05 10.10 12.48 15.40 12.66

Current Market Price (INR) 825.50

Target Price 954.00

Upside (%) 15.6%

52 Week High / Low (INR) 906.90/492.00

Market Capitalization (In INR Crs) 10,417.74

MARKET DATA

 

                                                                                            2  April 10, 2014

Company Overview IPCA was incorporated as 'The Indian Pharmaceutical Combine Association Limited.' in October 1949. The present management took over in November 1975 when the total turnover of the company was just INR 0.54 crores. Now, the company’s turnover is INR 2813 Crores (in FY13). The company introduced 6 new Brands in the India market during 2012-13. The Company is also using field-force to promote brands in more than 30 countries of CIS, South East Asia, Middle East, Latin America and Africa. It makes 61% sales from exports. The Company’s Clinical research is used as a tool to launch innovative combination formulations / NDDS and build strong brand with focused promotion. The Company’s marketing offices are situated in Russia, Ukraine, Vietnam, Philippines, Kenya, Columbia, Sri Lanka, Malaysia, and Nigeria. The reasons mentioned above helped the company make good sales through exports with over 29% CAGR in last four years. If observed, the company’s export in formulation part, it grew by over 35% CAGR in last four years and International Generics sales growth was above 36% in last four years.

Business overview

The Company has 12 Therapy attentive Marketing Divisions with field strength of 4159 to control over 2000 wholesalers. It has 5 brands among top 300 brands (HCQS, Lariago, Rapither-AB, Zerodol-P & Zerodol-SP). Ipca is the Market leader in Anti-malarial & Rheumatoid Arthritis. For above 60 years, Ipca lab has been partner healthcare globally in over 120 countries and in markets as assorted as Africa, Asia, Australia, Europe and the US. Ipca is a fully incorporated Indian pharmaceutical company, manufacturing over 350 formulations and 80 APIs for various therapeutic segments. Ipca is one of the world's largest manufacturers and suppliers of over a dozen APIs. These manufacturing facilities authorized by the world's most judicious drug regulatory authorities like US-FDA, UK-MHRA, EDQM-Europe, WHO-Geneva and many other. Out of the total export revenue, formulation accounts for 70%. The company is along with top 10 pharma exporter in India. The company has over 1500 products registered in 70 countries, and another 600 are in the process of registration in 50 countries.

Revenue Contribution

Source: Company Data, Microsec Research.

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                                                                                            5  April 10, 2014

Formulation Marketing

Company’s marketing strategies are segment based, there are 12 Specialty Focused Division which are paying rich dividend.

The 3C spotlights on the cardiovascular and anti-diabetic segments in markets that have the prospective for high-end medication. The 3D division makes stronger Ipca presence in the cardio-diabetic segment with most important focus on lipids management and dose-titration. Activa is the India's first specialty division dedicated to the needs of rheumatologists and orthopaedicians. It has attained a different leadership position in rheumatology with 46% market-share.

Atlus division supplies to the needs of intensive, both surgical and non-surgical, with a basket of oral and injectable antibiotics. Bionova's focus area is dermatology. It has already made its spot by leading in the oral anti-acne segment. It’s one of the highest growing divisions of Ipca.

This division offers a ample basket of trusted remedies to assist doctors for first-line treatments. The division spread into cardiovascular, gastro-intestinal, anti-bacterial, pain management and respiratory segments.

This cardio-diabetic division provides to the increasing needs of cardiologists and diabetologists. Hycare markets all major molecules for the management of cardiovascular diseases. Innova marks Ipca's entrance into the neuropsychiatry segment. Several firsts to its credit include world's first Quel SR (Quetiapine Sustained Release), India's first and only Inspiral SR. Company’s second largest division, It’s contents the largest number of anti-malarial brands that have helped company’s hold undoubted leadership in this segment with a market-share of over 34%. This is the company’s newest division, it provides to one of the fastest growing areas in the pain management market. Pharma is Ipca's most important division managing the largest number of brands. It focuses on multi-specialty areas like pain, cardiovascular, gastro-intestinal, anti-infective and cough. This super-specialty urology-focused division deal with several geriatric diseases like BPH, overactive bladder and calculi.

(Source: Company data, Microsec Research.)

3c

3d

Activa

Altus

Bionova

Dynamix

Hycare

Innova

Intima

Pain-management

Pharma

Uro Sciences

 

                                                                                            6  April 10, 2014

Manufacturing Units

Details of Shareholding in excess of 5%

Location Facility inspected by, and compliant with Operational since

Ankleshwar, Gujarat PMDA-Japan 1988

Aurangabad, Maharashtra WHO-GMP 1999

Baroda, Gujarat FDA-US 2005

Indore, Madhya Pradesh WHO-India 1994

Mahad, Maharashtra GMP 1989

Ratlam, Madhya Pradesh FDA-US, TGA-Australia , EDQM-Europe, EU cGMP, PMDA-Japan, KFDA-Korea and more 1985

Source : Company Data

Location Facility inspected by, and compliant with Operational since

Athal, Silvassa MHRA-UK, TGA-Australia, MCC-South Africa, ANVISA-Brazil and more 1995

Dehradun, Uttaranchal WHO GMP-India, Ivory Coast, NDA-Uganda, FDB-Ghana, MOH-Kenya 2006

Jorthang, Sikkim GMP 2011

Kandla, Gujarat MHRA-UK, TGA-Australia, MCC-South Africa 1993

Piparia, Silvassa FDA-US, MHRA-UK, TGA-Australia and HPFB-Canada 2004

Pithampur, Madhya Pradesh FDA-US, MHRA-UK, WHO-India 2008

Ratlam, Madhya Pradesh ANVISA-Brazil, MCC-South Africa, WHO–Geneva and more 1983

Source : Company Data

Name of Shareholder Number of shares %

Kaygee Investments Private Limited 2,70,18,195 21.41%

HDFC Trustee Co. Ltd. 89,30,656 7.08%

Exon Laboratories Private Limited 81,01,000 6.42%

Chandurkar Investments Private Limited 69,78,005 5.53%

Source : Company Data

APIs

Formulations

 

                                                                                            7  April 10, 2014

Industry Overview As per Ministry of External Affairs, govt. of India, Investment & Technology Promotion (ITP) Division, India is today one of the top promising markets in the global pharmaceutical picture. The sector is highly associated based and its steady growth is positively affecting the Indian economy. The organized nature of the Indian pharmaceutical industry is attracting several companies which are finding it possible to increase their operations in the country. The global pharmaceutical market was around USD 990 billion till 2013 and has been growing at a rate of about 4%-5.3% per annum. US, Japan and Europe represent lion’s share of the global pharmaceutical market and are growing at a slower annual rate mainly due to loss of exceptionality, minor new product approvals and price erosion due to generics competition. India is 14th largest pharma market globally and is valued at near about INR 180000 Crores (USD 30 billion)* as on Dec 2013, that is only 3% of the global pharma market growing at a CAGR of 15 %-17% till 2020. It is the fastest growing pharma market in the world. Indian Pharmaceutical market (IPM) is dominated majorly by branded generics, constituting nearly 70%-80% of market. The market is estimated to be among the top 10 by 2015. (Source: IMS) * Conversion rate of USD to INR is 60.00. Government Initiatives:

The Government of India has allowed 100 percent FDI through automatic approval route in new pharma projects.

The cabinet has approved Pharmaceutical Purchase Policy (PPP) for 103 medicines for availability for quality medicines at low prices to the musses.

The Government of India has decided to treat mono cartons containing medicines as primary label packaging, to ensure quality.

The Government of India has made tax breaks available to the pharma sector and a weighted tax deduction of 150 for any R&D expenditure.

References: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP), Press Information Bureau (PIB), Media Reports, Pharmaceuticals Export Promotion Council

 

                                                                                            8  April 10, 2014

Investment Rationale

1. Stable Growth to continue in all segments; Continent - wise exports to remain strong: Source: Company data, Microsec research. In America The Company achieved sales of INR 352.61 Crores as against INR 92.27 crores in 2008-09 with a CAGR of 40% in last four years .The company exports its APIs in USA, Canada & South American countries and formulation to USA, Canada, Panama, West Indies & few South American countries. The Company is currently marketing its branded and generic formulations in Venezuela, Columbia and Peru in the Latin American market with a few product registrations. At SEZ (Special Economic Zone) at Indore the formulations manufacturing division is adhering current Good Manufacturing Practices (cGMP) and regulatory requirements of developed countries in recent times it was inspected by US FDA and the Company is awaiting for the US FDA approval to start the formulations manufacturing for the US market. This manufacturing unit is currently manufacturing and exporting formulations to Europe The Company’s entirely holding subsidiary in Mexico is in the process of filing the formulation dossiers for registration in the America. Several more formulation dossiers are in the process of being registered / submitted for registration in all these markets of Latin America. In Asia excluding India the company recorded export sales INR 220.64 crores against INR 88.47 crores in the 2008-09 with a CAGR of 26% & in respect of previous year it increase by 54%. The company export formulation & APIs both to many Asian countries like Nepal, Srilanka, Myanmar, Philippines and Vietnam. The company has dedicated field force for the same which is being continuous expending. In Africa the company achieved INR 467.88 crores in 2013 against INR 127.89 in the 2008-09 with a CAGR of 38% & in respect to previous year growth done by 24%. The Company exports branded and generic formulations as well as APIs to 30 African countries. The company received WHO pre-Qualification for fixed dose anti malarial formulation of Artesunate + Amodiaquine which will help the company in consolidating in anti-malarial institutional business in Africa. In Europe the company achieved export sales of INR 485.66 crores in 2013 as against sales of INR 255.95 crores in the 2008-09 with a CAGR of 17%. The Company has developed and submitted 61 generic formulation dossiers for registration in Europe out of which 58 dossiers are already registered. The Company has also get certificate of suitability (COS) of 41 APIs in 2012 from European Directorate for Quality Medicines.

2008‐09 2009‐10 2010‐11 2011‐12 2012‐13 2013‐14 E 2014‐15 E CAGR of last 4 years

America 92.27 155.17 210.98 288.98 352.61 425 536 40%

Asia (ex. India) 88.47 94.41 111.57 143.3 220.64 276 355 26%

Africa 127.89 106.46 204.55 377.32 467.88 682 945 38%

Europe 255.95 365.9 387.99 444.84 485.66 519 560 17%

Australasia 11.94 15.38 32.15 39.79 49.52 66 86 43%

CIS 103.87 68.76 77.94 107.74 139.77 175 216 8%

 

                                                                                            9  April 10, 2014

In Australia the company achieved export sales of APIs & formulation to Australia and New Zealand in this sub-continent. The business growth in this continent was INR 49.52 crores against INR 11.94 crores in the 2008-09 with a CAGR of 43%. The Company has developed and submitted 46 generic formulation dossiers for registration in this continent out of which 41 dossiers are already registered.

The Company is focusing on registering more formulation dossiers in Australia and New Zealand through its wholly owned subsidiary Company Ipca Pharma (Australia) Pty Ltd, Australia and its wholly owned subsidiary Ipca Pharma (NZ) Pty Ltd., New Zealand.

In CIS the companies export business achieved of INR 139.77 crores in 2013 as against 103.87 in the 2008-09 with a CAGR of 8% but compare to the previous year sales 107.74 a growth of 30%. The companies most of the sales is coming from branded formulations sales in Russia, Ukraine, Kazakhstan and Belarus. This branded formulation are marketed by companies own field force appointed through its non trading offices, which is continuous expending its product range as well as geographical reach in the CIS market.

2. Market leader in Anti-malarial Drug:

Source: company Data, Microsec Research.

Ipca lab is India’s market leader in Anti-malarial drug across all dosage forms. Almost 18% of current turnover comes from Anti-malarial i.e. US$ 60 million.

The company launched "Mission Malaria" as a social reason, to save over a million lives lost every year. It has joined hands with research institutions, foundations, municipalities and other corporate bodies in treating malaria.

In formulation export Anti-malaria therapeutic contribution is just incredible. In the year of 2009-10 Anti-malaria contribution was just 7% in the year 2013 that was 37% of total formulation Export.

It has a dedicated Anti-Malarial marketing division in India with a special task force of 500 people. Range Of API's & Formulations in this segment:

Ipca markets APIs & Formulations of Amodiaquine, Artesunate, Artemether, Arteether, Beta- Arteether (Artemotil), Artesunate Sterile, Chloroquine Phosphate, Lumefantrine, Primaquine Sulphate, Sulphadoxine and Pyrimethamine

APIs like Chloroquine Sulphate, Proguanil HCL, Dihydro Artemisinin, Piperaquine Phosphate.

Other anti-malarial Formulations marketed - Quinine Tablet 300mg, 600mg, & Mefloquine Tablet 250mg.

Formulation Exports ‐ Therapeutic Contribution 2008‐09 2009‐10 2010‐11 2011‐12 2012‐13

Cardiovasculars & Anti‐diabetics  39% 41% 41% 31% 29%

Non‐steroidal anti‐inflammatory drugs (NSAID)  17% 21% 20% 18% 17%

Anti‐bacterials  16% 19% 11% 10% 9%

Anti‐malarials  15% 7% 19% 33% 37%

Gastro Intestinal (G.I.) products  4% 2% 1% 1% 1%

Cough Preparations  1% 1% 1% 2% 1%

CNS  1% 1% 3% 1% 1%

Anthelmintics 2% 2% 2% 3% 4%

Others  5% 6% 2% 1% 1%

TOTAL 100% 100% 100% 100% 100%

 

                                                                                            10  April 10, 2014

3. Ample opportunities to grow in export business:

Source: company Data

The Company is currently exporting its products to over 120 countries across the globe. The company is doing export business in segment, APIs & formulations very well with a CAGR of 26%. Though in the world pharmaceutical market, India has a share about 3-4% of total value, There is plenty opportunity to move up into the global market. India is recognized as one of the leading global player with a large no. of Drug Master File (DMF) and Active Pharmaceuticals Ingredients (APIs) and formulation with manufacturing facilities approved by regulatory authority of developed countries. Hence, Ipca Lab, which comes among the top 10 pharmaceutical companies in India.

4. Consistent growth in EBITDA margin, ROE:

Source: Company Data

The company’s PBIDT margin is continuous growing; in 2010-11 it was 19.97% in 2012-13 it was 22.36%. We expecting that it will be continue. In subject to EPS, the company’s Earning Per Share was 20.87 in the year 2010-11 which was 25.71 in the previous year. We are also expecting that will increase as past history. Company has been increasing its equity dividend from 80% to 200% in last 5 years and we expect the company to continue its healthy dividend payments in the upcoming years as well.

Profitability to Net Income FY 2010‐11 FY 2011‐12 FY 2012‐13

PBIDT% 19.97% 22.04% 22.36%

PBT% 18.27% 15.83% 16.61%

PAT (Before exceptional item)% 14.11% 12.02% 11.93%

Net Profit (After exceptional items)% 13.58% 12.02% 11.93%

Return on Capital Employed %  26.56% 24.22% 23.84%

Return on Net Worth % 25.18% 22.20% 21.11%

2008‐09 2009‐10 2010‐11 2011‐12 2012‐13 2013‐14 E 2014‐15 E

Export Income 680.39 806.08 1,025.18 1,401.97 1,716.08 2223.73 2787.10

Domestic Income 595.18 759.42 864.43 941.01 1,081.00 1095.27 1194.90

Total 1275.57 1565.5 1889.61 2342.98 2797.08 3319.00 3982.00

 

                                                                                            11  April 10, 2014

Peer Group Comparison (Standalone) Year End March 2013 (Rs. In Crore)

 

Source: Microsec Research, ACE Equity, Company Data

Key management

Particulars

( 01 April

2014) CMP No.of share M-Cap Rs cr Sales FY 13 EBITDA

EBITDA

Margin

(%) PAT

PAT

Margin

(%) EPS FY13

P/E (x)

FY13 P/BV (x)

ROE (%)

FY13

Net Worth

FY13

Total Debt

FY13 D/E FY13

Alembic Ltd. 18 26.70 491 179.22 31.34 17.5% 11.49 6.4% 0.43 42.8 1.19 5.6% 205.84 31.11 0.15

Biocon Ltd. 441 20.00 8820 1938.00 457.20 23.6% 275.70 14.2% 13.79 32.0 4.19 12.5% 2206.80 148.30 0.07

Cipla Ltd. 390 80.29 31313 8202.42 2348.27 28.6% 1507.11 18.4% 18.77 20.8 3.53 17.0% 8869.52 741.39 0.08

Divis Laboratories Ltd. 1370 13.27 18180 2128.89 871.04 40.9% 611.42 28.7% 46.06 29.7 7.12 23.9% 2553.28 4.49 0.00

Glenmark Pharmaceuticals Ltd. 585 27.12 15865 2025.38 448.69 22.2% 386.11 19.1% 14.26 41.0 6.28 15.3% 2523.18 84.95 0.03

Ipca Laboratories Ltd. 834 12.61 10517 2771.24 579.38 20.9% 331.39 12.0% 26.26 31.8 6.70 21.1% 1569.85 378.82 0.24

Lupin Ltd. 966 44.84 43315 7122.51 1907.23 26.8% 1260.43 17.7% 28.16 34.3 8.93 26.0% 4846.71 108.95 0.02

Orchid Chemicals & Pharmaceuticals Ltd. 54 7.04 380 1906.58 169.62 8.9% ‐530.23 -27.8% ‐75.26 -0.7 0.78 -108.6% 488.17 907.02 1.86

Ranbaxy Laboratories Ltd. 410 42.38 17376 6303.54 700.09 11.1% ‐162.34 -2.6% ‐3.84 -106.8 9.13 -8.4% 1922.08 4095.33 2.13

Torrent Pharmaceuticals Ltd. 552 16.92 9340 2766.23 810.82 29.3% 546.42 19.8% 32.29 8.7 2.83 33.1% 1651.09 535.31 0.32

Wockhardt Ltd. 552 10.97 6055 2471.18 636.70 25.8% 606.76 24.6% 55.37 10.0 7.69 54.3% 1116.72 367.49 0.33

Note: All figures are on Standalone basis , Figures represent FY13 figures, Rs. In Crore.

Premchand GodhaChairman & Managing 

Director

Ajit Kumar JainJoint Managing Director

Pranay GodhaExecutive Director

Madhukar R. ChandurkarDirector

Babulal JainDirector

Dr. V. V. Subba Rao

Director

Prashant GodhaExecutive Director

Anand T. KusreDirector

Dev Parkash YadavaDirector

Dr. Ramakanta PandaDirector

 

                                                                                            12  April 10, 2014

Strategy of inorganic growth – Acquisitions

Onyx Scientific Ipca has acquired UK-based Onyx Scientific (Onyx), by buying out the holding company Onyx Research Chemicals. The progress include to Ipca’s contract manufacturing business, for which it has set up a separate division called Covenance.

Onyx is a contract manufacturing pharma organisation (CMO) & chemistry contract research organisation (chemistry CRO). With position in the UK and India, Onyx supports clients from medicinal chemistry services through Phase I, Phase II & Phase III to large scale commercial API production. It is the leading chemistry companies in the UK that provides pharmaceutical chemistry services to large and promising pharma & biotech companies across the globe, helping accelerate candidates from discovery to production. The company is doing work for over 150 organisations and is a preferred partner for 5 among the top 10 pharmaceutical companies in the world. Services by Onyx

Lead Optimisation (Medicinal Chemistry) services. Chemical custom synthesis. chemical process development Solid State chemistry. Good Manufacturing Practice (GMP) synthesis. Large scale GMP API manufacturing.

 

                                                                                            13  April 10, 2014

Future Growth Drivers

Source: Company Data, Microsec Research.

The company is making strategies to build business like In licensing/out licensing in the promoted  therapy

The company is planning to push  its brand building in Pain, CVS, CNS, Anti‐infective, and Anti Malarial segment.

The Company’s most formulations are registered to be backed by own API. The Company  is expected sell generic dossiers with or without supply 

agreement.

The Company  is making planned tie up with three marketing partners for sale/distribution of Generic formulations in North America.

In North America, 38 ANDAs have been filed, of which 17 ANDAs are approved.

In every continent, 8 to 10 ANDAs targeted for filing for every year

Following MNC tie‐ups for supply agreements in International APIs business.

Non‐break patent process filed for International APIs Business.

Own API manufacturing to support  formulations, particularly for the Generic market.

Onyx Scientific has bolstered its business development team with the engagement of an knowledgeable new director. 

Ipca’s domestic pharmaceutical customers include pharmaceutical majors like Abbott, AstraZeneca, Bayer, Cipla, Dr. Reddy's, Merck, Pfizer, Ranbaxy, and Wockhardt. It expects the number and the volume of the same to increase.

 

                                                                                            14  April 10, 2014

Financials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME STATEMENT FY09-10 FY10-11 FY11-12 FY12-13 FY13-14E FY14-15E

Net Sales 1560 1883 2359 2813 3319 3983

% growth in Sales 21% 25% 19% 18% 20%

Other operating income 16 25 12 14 17 17

Total Income 1576 1907 2371 2827 3336 4000

Total Expenditure 1229 1479 1899 2253 2622 3136

PBIDT (Excl OI) 346 428 473 574 714 864

EBITDA(%) 22.0% 22.4% 19.9% 20.3% 21.4% 21.6%

Other Income 0 0 0 0 0 0

Operating Profit 346 428 473 574 714 864

Interest 33 31 41 33 25 20

PBDT 313 396 431 541 689 844

Depreciation 47 56 67 87 101 119

PBT 267 341 364 454 587 725

Tax 63 78 88 130 153 203

Profit After Tax 204 262 276 324 435 522

Minority Interest 0 0 0 0 0 0

Consolidated Net Profit 204 262 276 324 435 522

PAT (%) 12.9% 13.8% 11.6% 11.5% 13.0% 13.1%

% growth in PAT 28.7% 5.3% 17.5% 34.0% 20.1%

Exceptional Items 0 0 0 0 0 0

Extraordinary Items 0 0 0 0 0 0

PAT after EO 204 262 276 324 435 522

Equity Capital 25.0 25.1 25.2 25.2 25.2 25.2

Face Value (In Rs) 2.0 2.0 2.0 2.0 2 2.0

No. of shares 12.5 12.6 12.6 12.6 12.6 12.6

Adj EPS before EO 16.28 20.87 21.89 25.71 34.45 41.38

Source : Company Data, Microsec Research; All data in INR Crores unless specified 

 

                                                                                            15  April 10, 2014

 

BALANCE SHEET FY 2010 A FY 2011 A FY 2012 A FY 2013 A FY 2014 E FY 2015 ESOURCES OF FUNDS:Share Capital 25 25 25 25 25 25Share Warrants & Outstandings 0 0 0 0 0 0Total Reserves 840 1026 1229 1529 1913 2380Shareholder's Funds 865 1052 1254 1554 1938 2405Minority Interest -1 -1 0 0 0 0

Long-term Borrowings 364 195 330 366 293 234Deferred Tax Liabilities (Net) 79 81 93 130 130 130Other Long term Liabilities 2 1 1 1 1Long term Provision 5 9 12 12 12Long-term Liabilities 443 282 433 510 436 378Short-term Borrowings 90 263 201 157 134 114Trade Payables 179 235 268 308 354Other Current Liabilities 184 100 175 166 170 175Short-term Provisions 31 37 29 42 51 59Current Liabilities 306 578 640 634 663 702Total Debts 455 458 532 523 427 348Total Liabilities 1614 1912 2327 2697 3037 3484

APPLICATION OF FUNDS :Non-Current AssetsTangible Assets 635 696 916 1058 1217 1399Intangible Assets 2 3 4 23 23 23Capital Work in Progress 38 88 88 121 121 121Intangible Assets Under Development 7 6 8 8 8Fixed Assets 676 794 1015 1210 1369 1551Goodwill on Consolidation 24 24 24 24Non-Current Investments 33 41 34 9 9 9Deferred Tax Assets (net)Long-Term Loans & Advances 38 38 48 54 60Other Non-Current Assets 3 7 10 10 10Total Non-Current Assets 33 875 1117 1300 1465 1653Current AssetsCurrent Investments 0 0 0.15 0.15Inventories 380 466 670 741 830 996Trade Receivables 388 367 345 418 498 597Cash and Bank Balances 11 10 12 58 49 33Short-term loans and advances 126 63 35 42 46 50Other current assets 130 148 138 150 155

905 1037 1210 1397 1572 1831Total Assets 1613 1912 2327 2697 3037 3485

Source : Company Data, Microsec Research; All data in INR Crores unless specified 

 

                                                                                            16  April 10, 2014

Valuation We adopted Price-to-earnings (P/E) methodology to value Ipca Lab. Ltd. Based on FY2015E EPS of INR 41.40, the company is priced at 20times. We assigned a multiple of 23.05x because of the above factors and arrived at a target price of INR 954.00 for the stock, which represents an upside of 15.60% from the current market price of INR 825.50.

Risks

Foreign exchange translation/transaction loss may affect negative impact on bottom line

Rupee depreciation is expected to increase manufacturing costs, reason Company dependent on imports for raw materials around 50%.

If there is any change in pricing policy of drug by the authorities, the result of the company may be affected.

Regulatory Risk like patent litigation (presently Company does not have such a problem), product liability and other regulatory issues may change our Rating.

CASH FLOW FY 2010 A FY 2011 A FY 2012 A FY 2013 A FY 2014 E FY 2015 E

Net Profit Before Tax 267.00 341 364 454 587.00 725.00

Dep 47.00 56.00 67.00 87.00 101.00 119.00

Interest 33.00 31.00 41.00 33.00 25.00 20.00

Operating Profit Before WC Changes 80.00 64.00 108.00 120.00 126.00 162.00

Operating Cash Flow 192.00 214.00 354.00 389.00 398.00 419.00

Investing Cash Flow ‐117.00 ‐198.00 ‐286.00 ‐262.00 ‐260.00 ‐301.00

Financing Cash Flow ‐74.00 ‐18.00 ‐72.00 ‐80.00 ‐147.00 ‐134.00

Net Changes in Cash 1.00 ‐2.00 ‐4.00 47.00 ‐9.00 ‐16.00

Opening Balance 10.74 10.79 8.79 10.72 57.72 48.72

Closing Balance 11.74 8.79 10.72 57.72 48.72 32.72

Source : Company Data, Microsec Research; All data in INR Crores unless specified 

 

                                                                                            17  April 10, 2014

Microsec Research: Phone No.:  91 33 6651‐2121   Email: microsec_research@microsec.in            

Ajay Jaiswal: President, Investment Strategies, Head of Research: ajaiswal@microsec.in            

Fundamental Research                    

Name  Sectors  Designation  Email ID 

Nitin Prakash Daga  IT, Telecom & Entertainment  VP‐Research  npdaga@microsec.in 

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Technical & Derivative Research       

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Institutional Desk          

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PMS Division                                                                                                                                                                             

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Research‐Support                                                                                                                    

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stAs on 31 Mar 2014

 

                                                                                            18  April 10, 2014

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