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Motilal Oswal Report
Ipca Laboratories Ltd. has received a voluntary action indicated classification from the U.S. Food and Drug Administration for its Ratlam active pharme ingredient and Silvassa formulation plant.
The U.S. business was at a standstill since Ipca Labs had an import alert from the U.S. FDA across its sites since CY15.
The considerable remediation measures have finally led to the revival of the US generics business for Ipca.
We expect a gradual pick-up of the existing U.S. operations, which will also pave the way for new approvals. Another key event over the near term is the U.S. FDA classification of its Pithampur formulation site.
We value Ipca Labs at 28 times 12 months forward earnings to arrive at our target price of Rs 860. We expect 27% earnings compound annual growth rate over FY23-25 given the low base of FY23 (elevated opex) and revival in the generics business.
We reiterate our 'Neutral' rating as the earnings upsides over the next two-three years are adequately factored in at current valuation.
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