IPCA Laboratories share price: Sharekhan maintains Buy recommendation with price target of Rs 2560

IPCA Laboratories formulations segment revenues are set to grow strongly over the next two years, backed by a double digit growth in the domestic formulations. Over the past two months of January and February 2021, the company has consistently outperformed the IPM (Indian Pharmaceutical Markets) growth substantially attributable to the strong presence in the gastro – intestinal and pain segments. Further, healthy growth in the cardiology segment also supported the outperformance. IPCA Laboratories share price today is Rs 1827, down Rs 38 or 2.2%. 

Going ahead, with the IPM expected to grow in double digits (led by a pickup in volumes) in FY2022, is expected to have a positive rub off effect on IPCA Laboratories domestic formulations as well. The API segment has immense growth opportunities going ahead, as the company is witnessing strong demand traction in this segment and is debottlenecking existing capacities and setting up a small 50MT API plant at Ratlam (likely to go on stream by Q2FY22) to ease out capacity constraints.

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These would fuel growth in the near term and by FY2023, Dewas greenfield capacity expansion would come on stream and aid the top line growth. Collectively, strong revenue growth, supported by easing capacity constraints augurs well for Ipca Labs. Sharekhan expects sales and PAT to report a 15% and 30% CAGR, respectively, over FY2020-FY2023. IPCA Laboratories has also applied under the PLI scheme for Sartans at Dewas plant and If approved this could be a positive development and could add to the earnings growth.

IPCA Laboratories Key Risks:

1)      A delay in regulatory clearance of Pithampur and Pipariya plants
2)      adverse changes in the regulatory landscape could have an adverse impact on profitability