Indoco Remedies share price falls almost 6%; should you buy or sell this stock? Here's what top brokerages say | Mint
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Business News/ Markets / Stock Markets/  Indoco Remedies share price falls almost 6%; should you buy or sell this stock? Here's what top brokerages say
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Indoco Remedies share price falls almost 6%; should you buy or sell this stock? Here's what top brokerages say

In the last one year, Indoco Remedies share price has fallen over a per cent while the equity benchmark Sensex has gained 10 per cent in the same period. Indoco Remedies reported a 13 per cent QoQ rise in its Q2FY24 standalone revenue.

Indoco Remedies share price hit its 52-week high of ₹423.10 on January 2 this year and its 52-week low of ₹307 on April 26 this year, on the BSE. AFP PHOTO/ Indranil MUKHERJEE (AFP)Premium
Indoco Remedies share price hit its 52-week high of 423.10 on January 2 this year and its 52-week low of 307 on April 26 this year, on the BSE. AFP PHOTO/ Indranil MUKHERJEE (AFP)

Indoco Remedies share price witnessed strong profit-booking on Friday, October 20, as it declined 5.54 per cent to close at 331.60 on BSE, a day after rising about 2 per cent, following the company's September quarter earnings announcement.

Indoco Remedies share price opened at 346.20 against the previous close of 351.05 and fell 6.02 per cent to the intraday low of 329.90 on Friday. 

Indoco Remedies share price hit its 52-week high of 423.10 on January 2 this year and its 52-week low of 307 on April 26 this year, on the BSE. In the last one year, the stock has fallen over a per cent while the equity benchmark Sensex has gained 10 per cent in the same period.

Indoco Remedies Q2 results

During market hours on Thursday, October 19, Indoco reported a 13 per cent quarter-on-quarter (QoQ) rise in its Q2FY24 standalone revenue at 465.2 crore against 413.2 crore in Q1FY24.

EBITDA to net sales for the quarter is 15.6 per cent at 72.4 crore, compared to 15.2 per cent at 62.9 crore in the preceding quarter. Profit after tax (PAT) for the quarter stood at 32.9 crore, up 28 per cent QoQ, compared to 25.7 crore in Q1FY24, the company said in its exchange filing on Thursday.

However, on a year-on-year basis, the company's standalone PAT fell 32 per cent. In the same quarter last year, the company's PAT was 48.7 crore, according to the company's exchange filing.

“Our Q2 performance is primarily driven by international business, API business and sustained performance by domestic business," said Aditi Panandikar, Managing Director, Indoco Remedies.

Shares of the company closed 1.67 per cent higher on the BSE on Thursday after the company's Q2 earnings.

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Brokerages largely positive

Some brokerage firms are positive about Indoco Remedies stock after the company's Q2 earnings even they they have tweaked their estimates.

Brokerage firm Prabhudas Lilladher has maintained a buy call on the stock and raised the target price to 385 from 380 earlier.

However, the brokerage firm cut its FY24 and FY25 EPS (earnings per share) estimates by about 17 per cent and 6 per cent, respectively, to factor in low margins.

Prabhudas Lilladher underscored that Indoco Remedies’ Q2FY24 revenues were largely in-line, while EBITDA was 4 per cent below its estimates led by higher remediation cost. Adjusted for one-offs, margins came in at nearly 17 per cent.

Prabhudas Lilladher believes the recent OAI (Official Action Indicated) classification to its Goa unit-2 by the US Food and Drug Administration is negative and will restrict growth in US sales in FY24. However, the brokerage firm remains structurally positive on the company's growth prospects given the steady domestic franchise, which is 50 per cent of total sales, and reasonable valuations.

"We expect 17 per cent PAT CAGR over FY23-25E. At the current market price, the stock is trading at 17.5 times FY25E EPS. We retain our ‘buy’ rating with a revised target price of 385 valuing at 18 times Sept 2025E EPS, as we roll forward. Timely resolution of Goa facility unit-2 is key for re-rating," said Prabhudas Lilladher.

Another brokerage firm Nirmal Bang has an 'accumulate' call on the stock with a target price of 366.

The brokerage firm said despite a weak, acute season in Q2FY24, Indoco Remedies remains sanguine about growth in its domestic business and intends to clock 11-12 per cent growth for FY24. Additionally, the company has guided for EBITDA margins of about 17 per cent led by ongoing cost optimisation initiatives and better operational leverage.

"We like Indoco Remedies due to its high domestic market contribution and robust complex products portfolio for the US market. However, we are concerned about the company's disappointing performance on the domestic front and high dependence on some niche launches for growth in the US. Hence, we have maintained an 'accumulate' rating with a target price of 366, valuing it at 14 times Sept’25E EPS," said Nirmal Bang.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 20 Oct 2023, 10:50 AM IST
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