Expert tip: This Pharma stock can make you rich by giving 25% return in one year
Experts say the fundamentals of the counter are so strong that it may return to the tune of 25 per cent within one year of the investment.
At a time when markets are nosediving and the BSE Sensex already shed over 1,000 points in one week time, Indian equity investors are looking at the indices that are still performing well. Healthcare and IT are the indices that have done reasonable well even when the markets were sliding on successive trading session. Taking cue from this, market experts have bet high on the IPCA Lab, a pharma counter. Experts say the firm may return around 25 peer cent in one year to an investor.
IPCA’s Q3 beat experts' estimates across all fronts, led by a strong pick-up in export generics and sustained growth in India formulations. While management highlighted challenges in the WHO Global Fund tender business (not received any order as yet), sluggishness in the UK business (distributor-led issue), and forex fluctuations in Russia, experts' believe strong API capabilities are core to IPCA’s diversified exports business model, which, in our view, is a major competitive advantage, given growing cost pressures in global generics. Besides, lowering dependency on the anti-malarial segment in India formulations has aided in the betterment of gross margins.
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Speaking on the fundamentals of the counter, Bhavesh Gandhi, Analyst at Yes Securities informed Zee Business Online in a detail research report citing, "IPCA continues to report healthy numbers with Q3 growth at 10% yoy driven by branded exports, domestic sales and API traction. Branded business revenues surged 40% yoy after lackluster H1 even as management guided to steady growth. Domestic sales came in tad lower at +10% yoy though company maintained FY19 growth to come in at 14%."
Gandhi of Yes Securities went on to add that branded growth and operating leverage tailwinds drove improved gross margin and 550bps jump in OPM; margin rise would have been higher but for remedial costs incurred for two plants and Rs 70mn penalty for failure to supply Propranolol in the US. The company remains optimistic on resumption of Global Fund business and tender allocation which would translate into better FY20 for the segment. Other parts of business notably domestic formulations and branded exports are on a steady trajectory for 10-14% growth.
On his suggestion to the market investors in regard to the IPCA Lab counter, the research report of the Yes Security attributed to Bhavesh Gandhi says, "The scrip has upside potential for 25.3 per cent and can touch Rs 950/stock levels in 12 months time." The report suggests investors take a buy position in the stock and hold it for one year.
Standing in sync with Yes Securities views on IPCA Lab counter Sapna Jhawar, Senior Research Analysts - Pharmaceuticals at IndiaNivesh Securities said, "On the basis of strong fundamentals, the scrip is indicating an upside potential of 19 per cent. We recommend traders to buy this counter for the target of Rs 890/stock levels." The counter is currently oscillating around Rs 750 per stock levels.