IPCA Labs Long Term Buy Call: Sovid Gupta, FairWealth Securities

IPCACommissioned in 1969, Ipca labs (the Indian pharmaceutical combine association limited) is a fully integrated, rapidly growing Indian pharmaceutical company with a strong thrust on exports. Company's main revenue earners are its API and formulations division. Ipca exports formulations, bulk drugs, and drug intermediates to over 110 countries. Over the years, Ipca has established its distribution network across markets, and has set up subsidiaries in many countries. The company has strong alliances with global players for its operations in international markets.

Company has 8 manufacturing units with major facilities approved by various agencies. Company's topline has grown by CAGR of 17% over last 4 years, while cost of raw material over the same period has gone down from 43% in FY05 to 39% in FY09. Company has strong presence in exports with more than 53% topline contribution from exports down from 60% in FY05. For year ended FY09 sales have grown by 20% led by exports growth of 27% and domestic sales growth of 16%.

Exports growth was led by Exports growth in Formulations business in CIS countries
(Russia) and Africa, which grew by 70%. In fact 40% of the total sales growth was achieved by sales from these two countries, whose contribution grew from 13% of total sales to 18% of total sales, Operating profits degrew by 18% due to extra ordinary forex losses to the tune of 75 crore.

In FY 09, company has filed 14 ANDA, out of which it has received approval for 9 drugs. Company expects to file total of 20 ANDA for the current fiscal.

For the quarter ended September 2009(Q2 FY10) Net Profit increased by 75% to Rs
63.88 crore on total income of Rs 428.78 crore, which increased by 24% as against the corresponding period last year.

One of the largest pharmaceutical corporations in India today, Ipca manufactures over 150 formulations representing various Company's major therapeutic segments are Cardiovascular and Diabetes, Non Steroidal anti inflammatory, Anti Bacterial and Anti Malarials, together these four accounts for 87% of exports sales and 80% of the domestic sales for the segment.

Company is one of the largest manufacturer and exporter of API's backed by more than 27 years of expertise in pharmaceutical manufacturing. Ipca's APIs are well accepted all over the world and are currently exported to the regulated as well as to the non-regulated markets in all the major continents .During the financial year under report, the APIs and Intermediates business recorded sales of Rs. 351.56 crores as against Rs. 268.35 crores in the previous financial year. Nearly 69% of the APIs and Intermediates business is from exports. Company filed 46 DMFs
(previous year - 30 DMFs) with US FDA.