Emkay predicts strong upside in Ipca Labs shares on India, export growth

Emkay Global initiated coverage of Ipca Labs shares with 'Buy' rating and a share price target of ₹1,700 -- a 19 per cent upside from current levels

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Emkay Global on Ipca Labs: Ipca Laboratories (Ipca Labs) share price will remain in focus in Wednesday's trading session as domestic brokerage Emkay Global Financial Services has initiated coverage on the pharma stock with a 'Buy' rating.

  Emkay Global analysts are betting that the mid-sized pharma player is well placed to outperform peers over the medium term, driven by a strong domestic franchise and a recovery in its export business. The brokerage has set a share price target of ₹1,700, implying an upside of about 19 per cent in Ipca Labs shares from current levels.

 

Why is Emkay Global bullish on Ipca Labs shares?

According to Emkay Global, Ipca Labs has seen a steady rise in the Indian pharmaceutical market (IPM). Over the past three years, the company has emerged as one of the fastest-growing players among the top 20 listed pharma companies, clocking the second-highest market share gains during this period. 

Emkay Global believes the gains are not accidental. "Rather, they reflect a portfolio and execution playbook that the company has refined over several years," it said. 

"The strength of Ipca's domestic franchise and the company's potential for strong medium-term margin expansion are well acknowledged, with its domestic portfolio construct likely to remain a driver of sustained outperformance versus peers," Emkay Global noted.  ALSO READ | Emkay starts 'Buy' on Arvind SmartSpaces; sees cash flow, pre-sales growth 

Ipca Labs' domestic business

Ipca's domestic business, according to the brokerage, has consistently grown at around 1.5 times the pace of the overall IPM. While its portfolio may appear acute-heavy at first glance, Emkay points out that a large part of this book has a chronic-like prescription profile, particularly in pain management and related therapies. 

The company's therapy-focused marketing strategy, higher concentration on specialists, and better presence in metro and Tier I cities, it said, have translated into rising prescriptions per doctor and sustained volume-led growth. 

"Ipca's domestic formulations business, which accounted for nearly 52 per cent of its standalone revenue in FY25, posted a reported sales CAGR of ~11 per cent over FY22-25. The business has a portfolio of approximately 174 brands, supported by 22 therapy-focused marketing divisions," the brokerage said.

  Given raw material tailwinds, along with India formulations being a volume play, leverage gains from sustained volume-led double-digit domestic growth will always keep the company's overall margin expansion targets within reach, it added.

 

'Exports to drive growth'

Beyond India, Emkay Global believes Ipca’s export business is entering a "stronger growth phase" after navigating a challenging period marked by industry-wide headwinds. 

Europe, it said, is expected to be a key driver, both in APIs and generics, while branded formulations in the CIS and Asian markets are projected to maintain healthy momentum. A recovery in volumes and realizations across key API geographies such as Europe and the Americas from the first half of FY26 should support margin stability going forward, it said. 

One of the key drivers of Ipca Labs' exports would be driven by its Unichem portfolio which, Emkay says, is yet to be fully reflected in financial performance. 

The brokerage believes Ipca Labs has stabilised Unichem's operations, improving prescription share in its me-too generics portfolio. 

"Ipca's US re-entry has been aided by Unichem's established front-end presence, multiple synergy benefits, a robust launch pipeline, and cost optimization post the Bayshore merger. Leveraging Unichem’s portfolio in Ipca's core ex-US markets is a key element of the turnaround strategy, which will play out gradually in the medium term," Emkay Global said. 

As per Emkay, synergies from procurement, backward integration, and better utilisation of underused facilities have not been tapped into, and are expected to lift margins gradually.

  "Despite broader sectoral headwinds, a strong recovery starting H1FY26 aided by an uptick in volumes as well as realisations across key API markets (Europe and the Americas) is likely to ensure margin resilience and a sustained export API momentum going forward," it added. 

Ipca Labs: Financial outlook

Emkay Global estimates Ipca Labs to deliver an earnings CAGR of about 17 per cent between FY25 and FY28, supported by steady topline growth and operating leverage. The brokerage also expects the company to end FY26 with a net cash position, strengthening its balance sheet flexibility. 

Investors, however, should remain mindful of key risks, including regulatory risks emanating from USFDA inspections, inclusion of Ipca's key brands in NLEM, adverse price movements in the export API segment, and gross margin volatility in the Unichem portfolio, Emkay analysts cautioned.         =========  Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.