Buy stocks of IPCA Labs; target Rs 468

IPCA Labs:-

"IPCA Labs’ recorded better than expected revenue growth - up 19.7% YoY to Rs 6.34bn. Growth was primarily driven by rebound in domestic formulation (up 18.6% YoY) and 58% growth in export API’s (ramp-up in recently added capacities as well contribution from Tonira Pharma)."

"On the other hand, export formulations grew mere 9% YoY, restricted due to (1) “Track & Trace” issue & delay in artwork approval in the EU & Russia, (2) lagged US sales due to capacity constraints and (3) delayed shipment in the Institutional segment. The company also received approval for artesunate+amodiaquine - revenue contribution expected by Q4FY13E. The market size for the product is ` 1.5- 2bn and no significant competition is envisaged for next two years."

"IPCA’s growth mantra revolves around creating a competitive position in formulations by leveraging on its API goldmine. We expect acceleration in export formulation revenues mainly led by the generics arm (US market in particular post FDA approval to its Indore site) and sustained growth in branded promotional markets. Healthy rebound in domestic formulation revenues hereon shall add to growth momentum."

"We have increased our FY13E/14E EPS estimates by 8.8%/6.0% to reflect increased revenue contribution from Export API business and higher margins aided by favourable sales mix & currency benefits."

"At CMP, the stock trades at 13x FY13E and 11.4x FY14E earnings. We recommend ‘Accumulate’ on the stock with a revised target price of Rs 468 (13x FY14E EPS)," says Dolat Capital research report.