Home >Markets >Mark To Market >Firm domestic growth, export prospects keep street positive on Ipca Laboratories

Ipca Laboratories Ltd has rebounded well lately, having gained more than 17% from March lows. The company has remained a consistent performer over the last few quarters. Though extraordinary supply opportunity of Hydroxychloroquine (Hcqs), indicated under emergency use for covid-19 in the US, may have subsided, robust sales momentum in domestic markets and strong exports opportunity seem to be consistent earnings drivers for the company.

In the domestic market, the company’s portfolio continues to see strong traction in sales led by key segments and brands. The rebound in acute segment sales with improved patient footfalls at doctors' clinics and hospitals bode well. The same was indicated by strong growth in sales during the month of March.

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Ipca Laboratories posted good traction in the pain/analgesics segment (up 39% year-on-year or y-o-y) and gastro (up 36% y-o-y) segment, according to analysts' data. The company’s overall sales in the domestic arena are expected to have grown 13.8% during the month of March. The company continues to beat the Indian pharma market growth that is likely to have grown 10.3% y-o-y. The same is to boost the company’s Q4 performance too.

"We expect Ipca to clock 18% year-on-year sales growth in Q4FY21 on account of strong traction in its India sales (10%) and exports (30%)," said analysts at Anand Rathi Research. The company's earnings before interest, taxes, depreciation and amortization, or EBITDA, is expected to have grown 35% to 300 crore, while the margin is likely to have expanded 294 basis points (bps) to 23%, according to the research firm. It's expected to remain an outperformer with net profit growth of 68% y-o-y, adjusting for forex loss and impairment in Q4FY20. The strong traction in its key brand like Zerodol (pain management) is expected to fuel its 10.2% domestic business growth during the quarter.

Ipca has posted market share gains, on account of the pandemic, in products wherein smaller companies have been unable to meet supply requirements, say analysts at Motilal Oswal Financial Services Ltd (MOFL). The higher prescriptions for established brands such as Zerodol is to have helped further enhancing growth prospects for Ipca in this segment. Ipca has outperformed in the anti-neoplastics, central nervous system (CNS), dermatology, and urology segments as well, say analysts.

Led by investments toward capacity enhancement as well as the ongoing backward integration, Ipca’s active pharma ingredients business (25% of sales) could also sustain growth momentum over the next 3–5 years, feel analysts.

Product and customer diversification, as well as a healthy order-book offer better visibility in the institutional anti-malarial business over the next few years.

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