Buy Ipca Labs

Posted by admin

August 10, 2008

Strong performance in branded finished dosages, growth momentum in exports and a strong position in anti-malarial drugs makes Ipca Labs, a medium sized pharma company with Rs 1,100 crore revenues, a good investment option.

At the current market price of Rs 567, the stock trades at 8 times its 2008-09 earnings per share; at a discount to like-sized peers such as Torrent Pharmaceuticals and Matrix Labs.

Ipca has a diversified business strategy that minimises risks, both segment and geography-wise. In the last five years, Ipca Labs has grown revenues at annualised rate 19 per cent while profits have edged up 12 per cent.

The company has been able to maintain operating margins of over 20 per cent even as it has heavily invested in building capacities and expanding facilities, which is a positive.

The company has chosen to take a differentiated approach to acquire a front end presence in various markets. This is best exemplified by its tie-up with Ranbaxy for the US generic market and relationships with local leaders in semi-regulated markets in Europe.

Ipca has submitted 44 generic formulation filings for UK registration and 20 more generic formulations are under development at various stages for the European market. Also, the US business is expected to gain greater traction by the latter half of 2009, as the bulk drugs business may start contributing strongly.

Back home, Ipca has been able to deliver a 15-20 per cent growth (higher than industry) with ramp up in its major revenue therapies such as cardiovascular, malaria and pain-management. Over five products could be launched within the next fiscal.

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