IPCA LABORATORIES: Beat on all fronts; momentum to sustain over medium term

- API/branded generics formulation-led revenue growth: Sales were up 27% YoY at INR12.8b in 2QFY20, led by strong growth in exports (branded + institutional) and API segment.

- Operating leverage more than offsets lower gross margin: Gross margin (GM) shrank 400bp YoY to 65% due to product mix change (higher share of API sales). However, EBITDA margin expanded 50bp YoY due to controlled cost (employee/other expense down 280bp/160bp YoY). EBITDA was up 30% YoY at INR2.7b (our estimate: INR2.2b), while PAT grew 30% YoY to INR2b

- Valuation and View: Positive on IPCA on the back of its superior execution in branded generics (both, domestic as well as exports) and strong momentum in API.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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