Ipca Labs share price hits new high; Motilal Oswal upgrades stock to 'buy'

Ipca Labs news today: In the past one week, the stock of the pharmaceutical company has rallied 14 per cent as compared to 0.16 per cent decline in the BSE Sensex

Ipca Laboratories share price hit a new high of Rs 1,690 per share, gaining 2 per cent on the BSE in Monday's intraday trade, after Motilal Oswal Financial Services (MOFSL) upgraded the stock to 'Buy'. The brokerage cited better operational efficiency, a revival in the US business, synergies from the Unichem acquisition, and well-established domestic formulation (DF) business as key reasons to upgrade Ipca Labs share.

The brokerage firm values Ipca Labs at 38x 12-month forward earnings to arrive at a share target price of Rs 1,950 per share.

"We believe that the positive factors for Ipca Labs include strong domestic brand franchise, improved US Food and Drug Administration (USFDA) compliance, US business revival, synergic benefits of the Unichem acquisition, and improving operational efficiency," Motilal Oswal Financial Services said on Ipca Labs.

In the past one week, the stock of the pharmaceutical company has rallied 14 per cent as compared to 0.16 per cent decline in the BSE Sensex. In the past three months, Ipca Labs share has surged 39 per cent.

Ipca Laboratories is an integrated pharmaceutical company, manufacturing and marketing over 350 formulations and 80 active pharmaceutical ingredients (APIs), covering various therapeutic segments. The products of the company are sold in over 100 countries across the globe. The company has 18 manufacturing units in India, manufacturing APIs and formulations for the world market.

India is one of the largest producers of generic medicines globally with about 20 per cent share in global supply by volume and is also a leading vaccine manufacturer with a global market share of about 60 per cent. The Indian pharmaceutical industry is expanding rapidly and is expected to reach a size of about $130 billion by 2030 from $65 billion currently, Ipca Labs said in its FY24 Annual Report.

The company's branded formulations business in India now comprises 21 marketing divisions focusing on key therapeutic segments with a portfolio of about 165 brands. In order to increase the coverage and facilitate launch of new therapy divisions and new products, the company has added nearly 2,000 medical representatives in the domestic market during the last two financial years.

According to MOFSL, after three years of earnings deterioration, Ipca Labs is well-poised to deliver strong earnings growth over FY24-27. With broad-based growth in volume and pricing, Ipca Labs has been able to outperform the industry significantly in the domestic formulation (DF) market, with 15 per cent year-on-year (Y-o-Y) growth in MAT August 2024 and a 15 per cent compounded annual growth rate (CAGR) in MAT Aug’21-24.

Ipca Labs is making efforts to augment its export prospects through new launches and market share gains in generics exports. It is also working to drive synergies from the Unichem acquisition, the brokerage firm said in its report.

After a muted performance in the US generics business over the last 10 years due to compliance issues, Ipca Labs is geared up to revive its US business through improving USFDA compliance, new launches over the next 6-8 months, and synergies from the Unichem acquisition, it added.