Ipca Labs hits 52-week high; up 21% in 11 days post Q3 results

The stock hit a 52-week high of Rs 671, up 5% on the BSE in otherwise weak market.

Ipca Laboratories hit a 52-week high of Rs 671, up 5% on the BSE in intra-day trade, extending its past 10 days gain, after the company reported more than doubled net profit for the quarter ended December (Q3FY18) on back of strong operational performance.

In past 11 trading days, the stock of pharmaceutical company surged 20% from Rs 556 on February 6, as compared to 1.3% decline in the S&P BSE Sensex.

Ipca Labs reported a standalone net profit of Rs 1,056 million in Q3FY18 against Rs 414 million in year ago quarter. Total income increased 15% to Rs 8.7 billion from Rs 7.56 billion in the corresponding quarter of previous fiscal.

EBITDA (earnings before interest, tax, depreciation and amortised) margin improved 500 bps to 19.79% from 14.79%.

Analysts at local brokerage houses have bullish on the stock with 12 month target price in the range of Rs 715 and Rs 770.

“The company has invited US Food and Drug Administration (FDA) for inspection of Ratlam API (Active Pharmaceutical Ingredient) unit along with prior requests for reinspection of formulations units. Our bullish stance is built on assumption company would clear the FDA audits which would drive the rerating,” analyst at IIFL Wealth Management said in result update.

“The resumption of global fund orders along with strong Q3 operating performance underscore our positive view on the stock. As revenue return to normalcy, benefits of operating leverage will start kicking in,” analysts at Elara Securities said in quarterly update with ‘buy’ rating on the stock.

“The management expects the tender business to generate Rs 4-5 billion of revenue over next 2-3 years, assuming it gets pre-qualification of certain products. Also, the fortunes of API exports, domestic formulations and branded formulation exports look promising over the next two years,” according to analysts at ICICI Securities.

On the USFDA re-inspection front, the company has completed remedial at three locations and has invited USFDA officials for re-inspection, however, the resolution seems months away. With growing influence of ex-US segments in the earnings, the company once again becomes a compelling bet at this level given the FY17– 20E growth prospects- Sales, EBITDA and PAT CAGR of 10%,22% and 43% respectively, the brokerage firm said in result update.

At 11:24 am; the stock was trading 4% higher at Rs 666 on the BSE, as compared to 0.27% decline in the S&P BSE Sensex. A combined 314,541 shares changed hands on the counter on the BSE and NSE so far.