21/03/2013

Buy IPCA Laboratories Ltd For Target Rs.581.00

IPCA Laboratories Ltd. is a fully-integrated Indian pharma company manufacturing over 350 formulations and 80 APIs for various therapeutic segments.
* The Company has posted a net profit of Rs. 878.90 million for the quarter ended December 31, 2012 where as the same was at Rs. 639.30 million for the quarter ended December 31, 2011.
* Total Income is Rs. 7049.90 million for the quarter ended December 31, 2012 where as the same was at Rs. 6188.60 million for the quarter ended December 31, 2011.
* Domestic formulations income for the quarter of IPCA is up 13% at Rs. 2127.30 mn. Exports income for the quarter of IPCA is up 16% at Rs. 4423.70 millions.
* Ipca is a pharmaceutical company with a strong thrust on exports which now account for 60% of Company's income.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 14% over 2011 to 2014E respectively.
* IPCA Labs Ltd has international client roster includes global pharmaceutical giants like AstraZeneca, GlaxoSmithKline, Merck, Roche and Sanofi Aventis.
Investment Highlights
Results updates- Q3 FY13,
IPCA Labs Ltd is a fully integrated pharmaceutical company with presence in intermediates, APIs and formulations (generics and branded), reported its financial results for the quarter ended 31 Dec, 2012.
The company’s net profit jumps to Rs.878.90 million against Rs.639.60 million in the corresponding quarter ending of previous year, an increase of 37.41%. Revenue for the quarter rose 14.02% to Rs.7010.20 million from Rs.6148.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.6.97 a share during the quarter, registering 36.92% increase over previous year period. EBITDA is Rs.1437.70 millions as against Rs.1552.40 millions in the corresponding period of the previous year.
Outlook and Conclusion
*  At the current market price of Rs.514.00, the stock P/E ratio is at 19.15 x FY13E and 16.68 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.26.85 and Rs.30.82 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 14% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 12.64 x for FY13E and 11.00 x for FY14E.
*  Price to Book Value of the stock is expected to be at 4.05 x and 3.26 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.581.00 for Medium to Long term investment.
 Buy Glenmark Pharmaceuticals Ltd For Target Rs.565.00


Glenmark Pharmaceuticals Ltd, together with its subsidiaries, engages in the manufacture & marketing of pharmaceutical formulations
& active pharmaceutical ingredients in India and internationally.
* Glenmark Generics Europe Ltd has launched its first generic of Atovaquone Proguanil in the UK.
* Glenmark Generics Inc, USA, has received final ANDA from the U.S. FDA for Rizatriptan Benzoate Tablets.
* During the quarter, the robust growth of Net Profit is increased by 361.68% to Rs. 2129.17 million.
* Glenmark Generics Inc., USA has received final ANDA from the U.S. FDA for Mupirocin Calcium Cream USP, 2%.
* During the quarter, the Company converted 23,450 options into equity shares of Re.1 each.
* Glenmark’s current portfolio consists of 83 products authorized for distribution in the U.S. market & 46 ANDA’s pending approval with the U.S. FDA.
* Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 24% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
The company’s net profit jumps to Rs.2129.17 million against Rs.461.18 million in the corresponding quarter ending of previous year, an increase of 361.68%. Revenue for the quarter rose 33.97% to Rs.13816.13 million from Rs.10313.12 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.7.86 a share during the quarter, registering 361.13% increase over previous year period. Profit before interest, depreciation and tax is Rs.3253.13 millions as against Rs.1133.98 millions in the corresponding period of the previous year.
Outlook and Conclusion
India's pharmaceutical sector is expected to touch US$ 74 billion in sales by 2020 from the current US$ 11 billion, according to a PricewaterhouseCoopers (PwC) report.
* At the current market price of Rs.500.00, the stock P/E ratio is at 19.29 x FY13E and 15.79 x FY14E respectively.
*  Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs 25.92 and Rs.31.66 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 24% over 2011 to 2014E respectively.
*  On the basis of EV/EBITDA, the stock trades at 13.51 x for FY13E and 11.14 x for FY14E.
* Price to Book Value of the stock is expected to be at 4.36 x and 3.42 x respectively for FY13E and FY14E.
*  We recommend ‘BUY’ in this particular scrip with a target price of Rs.565.00 for Medium to Long term investment.
  Buy Bank Of Baroda For Target Rs.835

BoB has underperformed the Sensex by ~15% in last 3 months on back of asset quality concerns. Although we are modeling higher credit costs for BoB in the present restructuring cycle, its asset quality has performed better than its peers during last couple of quarters. Even though the stark asset quality variance relative to its peers may not hold for the stock, we do not foresee its delinquency conversing to the industry mean levels. Hence, we upgrade BoB to BUY from ACCUMULATE earlier with the unchanged TP of Rs.835 based on 1.1x its FY14E ABV.
Valuation & recommendation

Although we are modeling higher credit costs for BoB in the present restructuring cycle, its asset quality has performed better than its peers during last couple of quarters We are maintaining the earnings estimate for BoB and expect its net income to grow at 6.4% CAGR during FY12-14E. The stock trades at reasonable valuations (1.0x FY14E ABV; RoE at ~18%) and hence, we upgrade BoB to BUY from  ACCUMULATE  earlier with the unchanged TP of Rs.835 based on 1.1x its FY14E ABV.