Indoco Remedies zooms 20%, hits record high on strong Q1 results

Indoco is expected to post strong FY22 top line growth as Domestic sales normalize and grow amid opportunities arising out of post-Covid complications, ICICI Securities said

Shares of Indoco Remedies hit a record high of Rs 529.70 after they zoomed 20 per cent on the BSE in the intra-day trade on Thursday. The company reported a strong 40.2 per cent year on year (YoY) and 26.7 per cent quarter on quarter (QoQ) growth in revenue at Rs 386.8 crore for the quarter ended June 2021 (Q1FY22) on Wednesday on the back of a healthy growth in domestic markets due to traction for Covid portfolio during pandemic’s second wave.

The stock of the pharmaceutical company surpassed its previous high of Rs 495 touched on July 2, 2021. At 11:42 am, it was trading 15 per cent higher at Rs 507 on the BSE, as compared to a 0.29 per cent rise in the S&P BSE Sensex. Trading volumes on the counter jumped an over five-fold with a combined 4.3 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

In Q1FY22, the company's revenue from export formulations grew 60.5 per cent YoY and 15.7 per cent QoQ to Rs 152.5 crore driven by strong growth in Regulated and Emerging markets, while domestic formulations grew 46.3 per cent/54.5 per cent (YoY/QoQ) to Rs 215.1 crore.

The company’s profit after tax (PAT) more-than-doubled at Rs 39.6 crore from Rs 17.2 crore in the corresponding quarter of previous fiscal. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded 107 bps/29 bps (YoY/QoQ) to 22.5 per cent on account of lower employee expenses.

Indoco has 9 domestic marketing divisions with a strong brand portfolio in various therapeutic segments including Gastrointestinal, Respiratory, Anti-Infective, Stomatologicals, Ophthalmic, Nutritionals, Cardiovascular, Anti-Diabetics, Pain Management, Gyneacology etc.

After going through rough patches in FY18- 20, where Indoco faced headwinds on the domestic front (structural issues, pandemic) and exports front (regulatory setbacks), the situation is returning to normalcy, ICICI Securities said in a note.

Indoco is expected to post strong FY22 top line growth as Domestic sales normalize and grow amid opportunities arising out of post-Covid complications. Export formulations are also expected to post a robust growth on the back of strong pipeline and visible launch schedule. Additionally, the management expects 80-90 bps margin improvement in FY22 to around 19 per cent. With better visibility, we expect the company to maintain consistency and generate strong free cash flow (FCF), the brokerage firm added.