Prabhudas Lilladher Initiates Coverage on Ipca Laboratories, Sets Target Price at Rs 1800

Ipca Laboratories Reports Strong EBITDA Growth, Prabhudas Lilladher Maintains "Buy" Rating

Ipca Laboratories has reported a strong earnings performance, with its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increasing by 19.6% year-over-year (YoY) to INR 4.9 billion. This growth surpasses the estimates of research firm Prabhudas Lilladher, which had forecasted a 7% lower EBITDA.

The company has provided a positive outlook for the future, guiding a revenue growth of 12-13% and a 150 basis points (bps) margin expansion in the fiscal year 2027 (FY27). Prabhudas Lilladher has adjusted its earnings per share (EPS) estimates for FY27 and FY28, reflecting a 2-3% increase. This revised forecast takes into account an 11% revenue growth in FY27.

The domestic formulation and branded generic business of Ipca Laboratories continues to be a key driver of growth, contributing 46% to the company's revenues and approximately 70% to its EBITDA. This segment has been performing well, with a steady growth rate. The recovery of the API (Active Pharmaceutical Ingredients) segment, higher margins excluding Unichem, and steady growth in domestic formulation are identified as the primary growth drivers.

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Valuation and Recommendation

At the current market price (CMP), Ipca Laboratories is trading at an enterprise value to EBITDA (EV/EBITDA) multiple of 14.5x and a price-to-earnings (PE) multiple of 23x on the estimated earnings for FY28, adjusted for the Unichem stake. Despite this, Prabhudas Lilladher maintains a "Buy" rating on the stock, with a target price of INR 1,800 per share. This valuation is based on a price-to-earnings (P/E) multiple of 28x on the estimated earnings for FY28.