Ipca Labs rallies 9%, hits all-time high on hopes of healthy Q2 results

In Q2FY21, the company's Ebitda margins are likely to improve 740 basis points YoY to 28 per cent

Shares of Ipca Laboratories hit an all-time high of Rs 2,319 after rallying 9 per cent on the BSE on Tuesday in an otherwise range-bound market. The pharmaceutical company's stock surpassed its previous high 2,268, touched on October 1, 2020.

For the April-June quarter (Q1FY21), Ipca had reported over three-fold jump in its consolidated net profit st Rs 446 due to robust sales. The company had posted a net profit of Rs 129 crore for the corresponding period of the previous fiscal. Consolidated total income rose 41 per cent year on year (YoY) at Rs 1,546 crore. The company benefitted from good sales pick-up in hydroxychloroquine sulphate used in the treatment of Covid-19 in both domestic and export markets during Q1FY21.

Ipca is among India's top 20 pharmaceutical companies. Product portfolio has been expanding in the fast-growing therapeutic segments and includes cardiovascular (CVS), antidiabetic, and dermatology drugs.

Better-than-expected contribution from The Global Fund antimalarial business and timely resolution of import alert issued by the US Food and Drug Administration (US FDA) can provide additional uptick to revenue growth and profitability and hence will be key monitorables, rating agency Crisil said in August month rating rationale.

Meanwhile, analysts expect Ipca likely to post healthy operational performance during the recently concluded quarter.

Ipca Labs revenues are expected to grow 13 per cent YoY to Rs 1,447 crore due to overall growth. Export formulations are also expected to post robust growth o f 11 per cent to Rs 377 crore led by continued opportunity for HCQS in ex-US markets. Similarly, API segment is also expected to continue to benefit from chloroquine based opportunities in the quarter, ICICI Securities said in result preview.

Ebitda (earnings before interest, taxes, depreciation, and amortization) margins are likely to improve 740 basis points YoY to 28 per cent mainly due to change in product mix and lower marketing and travel spend. The net profit is expected to increase 55 per cent YoY to Rs 300 crore in line with a strong operational performance.

“We expect top-line to grow 10 per cent YoY, however decline 8 per cent QoQ due to dip in HCQs sales and lower than normal shipments to Europe due to high inventory levels. Domestic is likely to grow 5 per cent YoY on continued uptake in pain and cardiac therapies partly offset by weak malaria season. We expect EBITDA margins to improve 600bps to 27 per cent as raw material cost pressures have waned and some part of cost savings are here to stay which will drive margin,” Edelweiss Securities said in Q2FY21 result preview.