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IPCA Labs - Q2 FY23 Result Update

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IPCA Laboratories Limited

About the company

  • IPCA is a fully integrated pharma company manufacturing over 350 formulations & 80 APIs. Their exports were 50% of their revenues in FY21.
  • Pain management, cardiovascular & anti-diabetics, anti-infectives, anti-malarials account for 75% of the revenues.
  • In FY22, Formulations were 69% of the total revenue while API was 23%.

Q2FY23 Result analysis

  • The numbers were below estimates. Revenues increased 6% YOY, EBITDA fell 28.9% YOY & EBITDA margins declined 744 bps. PAT was down 53% YOY as well.
  • There was low demand in Latin America & Asian Markets. Raw material, energy & marketing costs remained high. 
  • Formulation business grew by 11.5% YOY. Domestic anti-malarial business showed a 19% decline. Cardiovascular underperformed too. Gross margins for domestic business were stable at 67-68%. UK business might fall marginally.
  • API business fell by 14.6% YOY due to pricing pressure in Latin American & Asian markets and Sartans impurity issue. API business is expected to decline 2-3% for the year.
  • In exports, branded business grew 33% YOY (Slow pickup in Russia & Sri Lanka), generic business grew 4% YOY & institutional business grew 22% YOY. 
  • Management plans to achieve a 21% EBITDA margin this year & 23% by FY24.




Conference call highlights

  • Domestic antimalarial de-growth was 19% & ex-antimalarial growth was 13%.
  • Less EBITDA margins because Higher energy, solvent costs & Higher marketing costs, field activities as well. 
  • Management expects full benefit of 1200 MR addition in 2 years.
  • Maintained 12-13% growth guidance for domestic formulations. 
  • UK market will growth well in the 2nd half of the year. CIS region should do well too, growth expected of around 15%.
  • Company expects anti-malarial business to remain flat. 
  • Raw material prices have started to soften. On API side, paracetamol is almost down 20%. Acetone, methanol, MDC, IPA, Plastic, PVDC, Aluminum foil prices have fallen. 
  • On the energy side, coal & furnace oil prices have fallen too. 
  • Impact of MR addition for FY23 would be around Rs. 100 crores. 
  • Company has outperformed in pain management, anti-infectives, dermatology, cough & cold, CNS while underperformed in cardiac market.
  • Silvassa facility is running at 15-20% capacity, SEZ Indore facility at 35-40% capacity.

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