Prabhudas Lilladher’s analysis report on Ipca Laboratories
IPCA Labs (IPCA) has entered right into a definitive settlement to purchase 33.4% promoter stake of Unichem Laboratories (Unichem). The acquisition will enable IPCA to re-enter US formulation generic market, nevertheless at 2.3x gross sales, as acquisition price is pricey in our view given challenges and uncertainty related to US market. We do consider that Ipca has an enormous scope to enhance its operational efficiencies and doubtlessly scale up OPM to +15% from present degree of 6-7% in close to time period. The corporate has additionally guided for Rs3bn annual EBITDA from Unichem enterprise inside 2 years of taking administration management. Even after factoring this, acquisition price works out to be at 10x EV/EBITDA and largely EPS impartial in FY25E, nevertheless RoE/RoCE shall be dilutive by ~200bps. Traditionally Ipca has accomplished few acquisitions, however with dimension like Unichem will check administration bandwidth and execution capabilities.
Keep ‘HOLD’ ranking with revised TP of Rs 750/share (Rs865 earlier) at 20x FY25E EPS.
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Ipca Laboratories – 26 -04 – 2023 – prabhu