Optimism on Europe, India biz to offset US sales losses for Ipca Labs

Analysts see 13.4% annual growth in domestic business over FY18-21

The Ipca Laboratories stock touched its lifetime high in trade on Wednesday, after brokerages turned upbeat on growth prospects in FY20. 

The optimism regarding the stock hinges on better-than-expected growth in the Indian market, improvement in its European business, and an uptick in the tender business from global multilateral organisations.  

These business segments are expected to offset the revenue loss from its US business, which is dependent on the resolution of USFDA issues related to its Ratlam, Pithampura (Indore) and Silvassa plants. 

Among the main triggers is the India business, which is expected to post growth rates much ahead of peers. Say analysts at Anand Rathi Research: “We believe Ipca’s domestic formulations will grow in the mid-teens, and its institutional anti-malaria tender business will ramp up from FY20, powering growth ahead.”

In the first nine months of FY19, the company’s institutional business has already clocked in 10 per cent year-on-year growth at Rs 120 crore. 

 

The company expects to close the current fiscal at Rs 180 crore, say analysts. The company has started registering and receiving orders for a malarial treatment dispersible tablet, and has prequalified for another malaria treatment injectables (approval expected in FY20). Analysts thus expect the company’s institutional sales to nearly double by FY21 as compared to FY19.  

Ipca’s institutional tender business for anti-malaria drugs will improve its medicine supply to the Global Fund from April FY20, say analysts at Prabhudas Lilladher, who say that its partner Bristol Lab receiving resolution of the British drug regulator’s nod will pave the way for Ipca’s generics in the country.

The company’s export formulations (30 per cent contribution to sales) are expected to grow 14.2 per cent annually during FY18-21, as compared to 6 per cent during FY11-18. 

This will be driven by branded formulation exports and recovery in the tender and generic exports business, say analysts at ICICI Securities. 

They expect the domestic business (with above 40 per cent contribution) to grow 13.4 per cent annually during the FY18-21 period, as compared to 10 per cent annual growth over FY14-18.

In the domestic arena, the firm’s dependence on its anti-malaria range had, at times, led to lumpiness in growth in the past. However, with incremental growth in therapies such as anti-bacterial, pain management, and cardio vascular, among others, which have been clocking double-digit growth during the first nine months of FY19, analysts feel the overall portfolio is poised for better growth.

Meanwhile the company has completed most of its remediation work at the plants that were under the USFDA scanner, and clearance over the next year could help it add to its revenue base.