Superior execution, market share gains to drive growth in DF. While doctors have resumed their clinics, partly on account of having received their vaccinations, patient footfall is yet to return to normal levels. Particularly, patient footfall remains low in the case of paediatrics. IPCA has witnessed sustained growth momentum in the pain segment. It has posted market share gains, on account of the pandemic, in products wherein smaller companies have been unable to meet supply requirements. Moreover, higher prescriptions for established brands such as Zerodol have enhanced growth prospects for IPCA in this segment.
We value IPCA on a 24x 12month forward earnings basis to arrive at target price of Rs 2,480. Reiterate ‘buy’. IPCA has outperformed in the anti-neoplastics, central nervous system (CNS), dermatology, and urology segments as well. IPCA has been a small player in anti-Infective therapy – growth prospects have been impacted even further due to Covid. IPCA is gradually reviving sales in this therapy via new launches and increased traction in existing products. Overall, we expect a 14.5% sales CAGR in DF to Rs 27billion (37% of sales) over FY21–23. Capacity expansion, backward integration to improve API prospects. Led by an investment of `4billion toward capacity enhancement as well as the ongoing backward integration, we believe IPCA’s API business (25% of sales) would sustain the growth momentum over the next three–five years.
Branded export business to see growth revival IPCA has reported sales of ~Rs 3.8billion (7% of sales) in the branded export segment over the past 12 months (down 5% YoY), largely due to the Covid-led disruption. However, with a reduction in daily new cases in the Middle East / West Africa, the segment is expected to see growth recovery.
Strong order book provides visibility in Institutional business. Product diversification, customer diversification, and a healthy order-book have offered better visibility in the Institutional Anti-Malarial business over the next 12–24 months. We expect a sales CAGR of 8% to `4.3billion (7.5% of sales) over FY21–23. Valuation and view. Adjusted for one-time business in FY21, we expect IPCA to deliver a 16% earnings CAGR over FY21–23 on a) better-than-industry growth in DF, b) recovery in the Branded business, c) increased prospects in the UK business, d) increased business opportunity in the Institutional segment, and e) a capacity enhancement exercise in the API segment.