IPCA Labs has come up with robust growth in Sales, sharp jump in margins and witnessed sharp growth in PAT during the Dec.'13 quarter. The Company Standalone Sales grew by 19% YoY in Q3'FY14 to Rs 832.95 crore driven by the strong growth from Export market (19%) coupled with good growth from the domestic market (15%) during the quarter. Notably, Operating Profit Margins expanded by 350 bps YoY to 26.1% due to some loss of profit claim from pending charges, milestone payments of dossiers from US market (both accounted 1% margin gain) during the quarter. Accordingly, operating profit grew by robust 37% YoY to Rs 217.34 crore. Further, after the higher other income (37%), lower interest cost (-26%), even with higher depreciation (19%), but after sharp fall in forex losses (down by 87%), despite higher effective tax rate (up by 310 bps YoY to 26.5%), Profit after Tax grew by sharp 58% YoY to Rs 139.12 crore.
- Robust Growth in Sales:
The Sales grew by robust 19% YoY to Rs 832.95 crore for the quarter ended December 2013. The growth in Sales was driven by the strong growth from Formulations (18% YoY to Rs 628.13 crore) coupled with good growth in API's (up by 15% YoY to Rs 187.02 crore) during the quarter. The Sales from the promotional business grew by 14% YoY to Rs 100.13 crore, Generic business grew by 25% to Rs 141.75 crore and Institutional business grew by 20% YoY to Rs 135.95 crore respectively. In the domestic market, Pain Management outperformed the market and grew by 23% during the quarter. Despite price related issues Cardiac grew by 12%, but anti-malarial business decline by 2% in Q3 and down by 6% in 9M'FY14 impacted by the price reduction despite the higher volume growth.
- Sharp jump in Margins:
The Margins expanded by 350 bps YoY to 26.1% on the back of sharp fall in consumption cost despite increase in other expenses (up by 220 bps YoY) and higher staff cost (up by 130 bps YoY) as percentage to sales and net of stock adjustments. As a result, Operating profit grew by sharp 37% YoY to Rs 217.34 crore. The EBIDTA growth was un-impacted and was at Rs 222.76 crore after the 37% growth in other income to Rs 5.42 crore.
- Sharp fall in forex losses, higher tax rate in Q3:
With meager interest cost Rs 5.44 crore (down by 26%) and after accounting to the higher depreciation (up by 19% YoY to Rs 25.58 crore), PBT before forex loss grew by 44% YoY to Rs 191.74 crore. After adjusting for lower forex loss Rs 2.42 crore (down by sharp 87%), Profit before Tax grew by 65% YoY to Rs 189.32 crore. Even after sharp rise in effective tax rate (up by 310 bps YoY to 26.5%) Profit after Tax grew by 58% YoY to Rs 39.12 crore.
- Expects to ramp up launches in US market in FY'15, about Rs 125 crore additional sales expected:
The Company filed 38 ANDA's with USFDA and received approval 17 products as on 31st December 2013. It has commercialized 8 products, rest of the approved products (except one) to be commercialized in FY'15. The Indore SEZ will see heavy shipments from the March 2014, and expects Rs 125 crore additional sales from US market in FY'15. Further, it expects to file 12 ANDA's (already filed 6 and rest in the Q4) with US FDA for FY'14. It expects to file 10-12 products for the FY15 and expects further ramp up in the filings if biobase facility is commissioned. Notably, it expects the USD 100 million from the US market by FY'16 if they get approval for certain ANDA's from the US FDA.
- Targets Institutional anti-malarial Sales of Rs 510-520 crore in FY'15:
The Institutional anti-malarial business expected to be little lower than Rs 450 crore for the FY'14, impacted by price reduction in the domestic market. It targets sales of Rs 510-520 crore by FY'15 and Rs 800 crore by 2018. The Company further expects domestic market to grow by 15-16% for the FY'15. The promotional market expected to grow 25-30% or the same period. The Capex expected to be Rs 350 crore for the FY'15 and it is little less than this for the FY'14.
- Revenue Mix – Formulations up by 18% and API's grew by 15%:
The revenues from the Formulation business (77% of Net sales) grew by 18% YoY to Rs 628.13 crore for the quarter ended December 2013. The growth in Sales was driven by the strong 20% growth from Export formulation to Rs 381.8 crore, and good 16% growth in domestic formulation business to Rs 246.33 crore respectively. Also, the revenues from the API's business (23% of Net Sales) grew by 15% YoY to Rs 187.02 crore during the quarter. This was on the back of 16% growth in export APIs to Rs 145.13 crore and 12% growth in domestic APIs to Rs 41.89 crore respectively.
Standalone Nine Months Performance:
The Sales grew by 18% YoY to Rs 2485.21 crore for the nine months ended December 2013. Also, OPM slightly improved by 30 bps YoY to 25.1% and after this OP grew by 30% YoY to Rs 622.89 crore. After the 6% decline in other income to Rs 15.20 crore, EBIDTA grew by 29% YoY to Rs 638.09 crore. With the lower interest cost (down by 29% YoY to Rs 18.30 crore) and after the higher depreciation (up by 20% YoY to Rs 74.91 crore), PBT before forex loss grew by 34% YoY to Rs 544.88 crore. After adjusting for higher forex losses (up by 27% YoY to Rs 90.29 crore) PBT grew by 35% YoY to Rs 454.59 crore. Further, after higher effective tax rate (up by 130 bps YoY to 25.1%) PAT grew by 33% YoY to Rs 340.34 crore.
Valuation:
- The scrip is up by 2.20% to Rs 815.90 at BSE, India on 29th January 2014 and currently trading 19 times to the consolidated annualized EPS Rs 44.1.
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