Ipca Labs Q1FY13: Strong domestic numbers; export grows by 8.7%
Ipca Labs has come out with strong set of domestic numbers in Q1FY13 however; export formulations grew by only 8.7% since UK & Russia business were impacted to the extent of Rs350-450 mn due to the implementation of Track & Trace system. The company on the revenue front has registered a growth of 19.7% to Rs6344 mn with PAT registering a de-growth of 30.3% to Rs429.8 mn mainly on the back of a forex loss of Rs588.5 mn as against a forex gain of Rs91 mn in Q1FY12. The following are the key highlights of the results which are summarized below:
Key Highlights of Q1FY13
- Revenues grew by 19.7% YoY from Rs5299 mn in Q1FY12 to Rs6344 mn in Q1FY13. The company’s domestic business including APIs which contributes ~42% to the sales of the company registered a strong growth of 14.7% whereas the export business including APIs registered a strong growth of 23.6%.
- On the domestic formulations front, of the total 12 marketing divisions, 8 witnessed double digit growth (Rheumatoid arthritis, Pain, CVS, Cough & cold etc.) while other 4 divisions are still struggling for growth. It recording a 18.6% growth from Rs1890 mn in Q1FY12 to Rs2242 mn in Q1FY13 mainly on account of 19% growth in Pain management, 30% in cough & cold, 20% in Rheumatoid Arthritis & 14% in CVS segment.
- Export formulations increased to Rs2245 mn in Q1FY13 from Rs2066 mn in Q1FY12 mainly on the back of a 12.6% growth in its institutional business, 6.9% growth in its generic portfolio and branded portfolio recorded a growth of 8.5%. On the Generics side, formulations grew on the back of a 14% growth in the US market and approximately 34% growth in the Australia/NZL region combined whereas Europe witnessed a flattish trend. On the Branded side, markets such as LatAm (100% YoY growth), Asia (62% YoY growth) & W Africa (15% YoY growth) recorded good growth whereas CIS witnessed revenue decline of 34% majorly from delay in shipment due to the implementation of the Track & Trace system.
- Ipca clocked API revenues to the tune of Rs1816 mn, a growth of 38.8% YoY with the export API posting a growth of 57.9% YoY which includes Rs140 mn on account of Tonira acquisition, while the domestic API de-grew by 3.3% YoY on the back of greater captive consumption.
- Operating profit reported growth of 50.4% YoY from Rs942.6 mn in Q1FY12 to Rs1417.8 mn in Q1FY13. On account of higher rupee average realization and strong revival in domestic formulations, the EBIDTA margin came in at 22.3% v/s 17.8% in Q1FY12.
- Reported Net Profit witnessed a de-growth of 30.3% amounting to Rs429.8 mn in Q1FY13 whereas margins were at 6.8% mainly on the back a 28.3% YoY rise in interest costs, 29.3% jump in depreciation and a forex loss to the tune of Rs588.5 mn. The company had registered a forex gain of Rs91 mn in Q1FY12.
Stock Valuation and Recommendation
With the domestic formulation business reporting strong growth for the second quarter running, US business expected to receive a considerable boost by the USFDA approval for the Indore SEZ and strong traction in its institutional business (expected to garner Rs3600 mn in FY13E + Artesunate Amodiaquine approval expected to generate revenues from Q4FY13E); Sushil Finance maintains their positive view on the stock. Also with the de-growth witnessed in Russia being a one time phenomenon, they believe Ipca’s branded generics business will also add to the growth in a big way in FY14E. Sushil Finance thereby recommends a HOLD on the stock with a TP of Rs441 (14x its FY14E EPS of Rs31.5).
Key Highlights of Q1FY13
- Revenues grew by 19.7% YoY from Rs5299 mn in Q1FY12 to Rs6344 mn in Q1FY13. The company’s domestic business including APIs which contributes ~42% to the sales of the company registered a strong growth of 14.7% whereas the export business including APIs registered a strong growth of 23.6%.
- On the domestic formulations front, of the total 12 marketing divisions, 8 witnessed double digit growth (Rheumatoid arthritis, Pain, CVS, Cough & cold etc.) while other 4 divisions are still struggling for growth. It recording a 18.6% growth from Rs1890 mn in Q1FY12 to Rs2242 mn in Q1FY13 mainly on account of 19% growth in Pain management, 30% in cough & cold, 20% in Rheumatoid Arthritis & 14% in CVS segment.
- Export formulations increased to Rs2245 mn in Q1FY13 from Rs2066 mn in Q1FY12 mainly on the back of a 12.6% growth in its institutional business, 6.9% growth in its generic portfolio and branded portfolio recorded a growth of 8.5%. On the Generics side, formulations grew on the back of a 14% growth in the US market and approximately 34% growth in the Australia/NZL region combined whereas Europe witnessed a flattish trend. On the Branded side, markets such as LatAm (100% YoY growth), Asia (62% YoY growth) & W Africa (15% YoY growth) recorded good growth whereas CIS witnessed revenue decline of 34% majorly from delay in shipment due to the implementation of the Track & Trace system.
- Ipca clocked API revenues to the tune of Rs1816 mn, a growth of 38.8% YoY with the export API posting a growth of 57.9% YoY which includes Rs140 mn on account of Tonira acquisition, while the domestic API de-grew by 3.3% YoY on the back of greater captive consumption.
- Operating profit reported growth of 50.4% YoY from Rs942.6 mn in Q1FY12 to Rs1417.8 mn in Q1FY13. On account of higher rupee average realization and strong revival in domestic formulations, the EBIDTA margin came in at 22.3% v/s 17.8% in Q1FY12.
- Reported Net Profit witnessed a de-growth of 30.3% amounting to Rs429.8 mn in Q1FY13 whereas margins were at 6.8% mainly on the back a 28.3% YoY rise in interest costs, 29.3% jump in depreciation and a forex loss to the tune of Rs588.5 mn. The company had registered a forex gain of Rs91 mn in Q1FY12.
Stock Valuation and Recommendation
With the domestic formulation business reporting strong growth for the second quarter running, US business expected to receive a considerable boost by the USFDA approval for the Indore SEZ and strong traction in its institutional business (expected to garner Rs3600 mn in FY13E + Artesunate Amodiaquine approval expected to generate revenues from Q4FY13E); Sushil Finance maintains their positive view on the stock. Also with the de-growth witnessed in Russia being a one time phenomenon, they believe Ipca’s branded generics business will also add to the growth in a big way in FY14E. Sushil Finance thereby recommends a HOLD on the stock with a TP of Rs441 (14x its FY14E EPS of Rs31.5).
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