Ipca Laboratories (Ipca) has reported a 27.1% increase in its net sales to Rs317.6 crore for Q4FY2009. The sales growth was largely driven by a sustained traction in the export markets and a steady growth in the domestic formulations.
After a tepid Q3FY2009, Ipca’s domestic formulation business resumed its growth trajectory, growing by 14.8% to Rs94.5 crore in Q4FY2009.
The overall growth was driven by the key therapeutic portfolios: cardiovascular segment (up by 26%), diabetology (up by 31%), dermatology (up by 58%), central nervous system (CNS; up by 27%), anti-malarial segment (up by 23%) and anti-bacterial segment (up by 9%).
The reported net profit in Q4FY2009 dropped 65.1% to Rs7.9 crore, largely due to a loan provision of Rs10.2 crore for its Brazilian subsidiary.
Further, the marked-to-market (MTM) foreign exchange (forex) loss of Rs15.4 crore, a higher interest cost (up by 70.9%) and a higher depreciation charge (up by 25.1%) dented the profitability.
On adjusting for the forex loss and the loan provision impact, the adjusted profit after tax (PAT) actually grew by 46.8% to Rs33.5 crore. The company’s earnings per share (EPS) stood at Rs7.2 in Q4FY2009.
Based on the strong traction from the export segment, Ipca’s management has guided to a revenue growth of 18-20% and a steady margin growth (sustainable at 20-21%) for FY2010.
We have adopted a conservative approach and modeled a 15% revenue growth and a flat OPM at 19.3% for the current fiscal. Our revised EPS estimate stands at Rs70.9 for FY2010.
We are also introducing our FY2011 numbers in this report. We expect the company to register a revenue growth of 17.8% in FY2011 to Rs1,750.5 crore.
The profits are expected to grow by 20.6% to Rs213.7 crore in the same period, resulting in earnings of Rs85.5 per share.
At Rs547, Ipca is attractively valued at 7.7x FY20010E earnings and 6.4x FY2011E earnings. We roll over our valuations to the FY2011 earnings estimate and maintain our BUY call with a price target of Rs664.