04 November 2011

IPCA Laboratories: TP: INR378- Buy:: Smoother road ahead ::Motilal Oswal

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Smoother road ahead
APIs, Brands, Capacity expansion
 One of the better managed mid-cap pharma companies in India with (1)
vertically integrated business model, (2) strong domestic formulations
business, and (3) profitable international business.
 Sharp 30% correction in stock price on short-term headwinds offers lucrative
long-term entry opportunity.
 Long-term story intact; offers balanced play on growing domestic
formulation opportunity and international formulations on the back of strong
API capabilities.
Consistent industry outperformer in domestic formulations: Over FY05-11, IPCA's
domestic formulation business clocked revenue CAGR of 22.5%, over 1.5x the industry
CAGR of 14%. As a result its market share has improved from 1.18% in FY06 to
1.42% in FY11. IPCA has consistently outperformed the market growth rate on the
back of multiple drivers: (1) Growing share of chronic therapeutic segments in revenue
mix, (2) Focus on product selection, brand building and new launches, (3) Expansion
in the field force, and (4) Proper divisionalization of products. Given all these positives,
we expect IPCA to maintain its track record of outperforming the industry growth rate.
After a muted 10% growth in FY12, we expect growth to rebound to 18% levels in
FY13, translating into FY11-13 CAGR of 14% (v/s 14% for the industry).
APIs offer core competitive advantage of vertical integration: IPCA is one of
India's largest manufacturers of APIs, and the global leader in select APIs, with market
share of 50%+ coupled with healthy profitability. IPCA is aiming to be world leader in
~25 APIs in the next 3-4 years (15 currently). This augurs well for the company as (1)
it offers core competitive advantage of vertical integration benefit, and (2) it creates
opportunity to grow revenues beyond captive demand.
Geographic expansion and new Indore SEZ to drive international formulations
growth: IPCA has built a strong international formulation business with presence in
110 countries across regulated and emerging markets. This business has two main
segments: (1) Branded generics, and (2) Pure generics. We believe IPCA's branded
generic business will grow at CAGR of 20-25% over the next two years on the back of
(1) Strong sales force, (2) Geographic expansion to South/Central American and Western
African countries; and (3) Introduction of new products. The key drivers of pure generics
business are: (1) Europe: Geographic expansion beyond UK, (2) US: FDA approval
for Indore SEZ, and (3) Africa: Lucrative opportunity in Artemether-Lumefantrine, an
anti-malaria formulation.
Expect 25% earning CAGR over FY11-13; Initiate with Buy and price target of
INR378: We expect IPCA to clock FY11-13 PAT and EPS CAGR of 25% on the back
of 18% revenue CAGR coupled with margin expansion. Further, despite INR5b capex
to sustain growth, the company is likely to sustain healthy return ratios and low gearing.
At 9x FY13 earning, the stock trades at 25-50% discount to its historic and peer
valuation. Initiate coverage with Buy rating and target price of INR378 (14x FY13E
EPS), 50% upside.

NSE, Bulk deals, 04-Nov-2011

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DateSymbolSecurity NameClient NameBuy / SellQuantity TradedTrade Price /
Wght. Avg.
Price
Remarks
04-Nov-2011ACROPETALAcropetal Tech LtdALEXURE SECURITIES PVT LTDSELL2,16,90013.47-
04-Nov-2011GITANJALIGitanjali Gems LimitedSUPARSHVANATH STK & SER P. LTDBUY4,53,395356.69-
04-Nov-2011GITANJALIGitanjali Gems LimitedSUPARSHVANATH STK & SER P. LTDSELL4,53,395357.11-
04-Nov-2011HOVSHOV Services LimitedHEENA GANDHIBUY67,62262.16-
04-Nov-2011HOVSHOV Services LimitedHEENA GANDHISELL67,62262.35-

BSE, Bulk deals, 4/11/2011

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Deal DateScrip CodeCompanyClient NameDeal Type *QuantityPrice **
4/11/20115121618K Miles SoftwareSURENDRA MANGALDAS MARFATIAB4000045.50
4/11/2011531358Choice IntlJITENDRA SHANTARAM BERDEB4192855.89
4/11/2011511672Clarus FinancePERFECT HOMFIN PRIVATE LIMITEDS10000043.00
4/11/2011532363CompulearnS.K. KANKALB11500014.72
4/11/2011512379Cressanda SolRAHUL AGARWALS705005.40
4/11/2011532823Euro CeramicsDAKSHA SUBHASH SHAHB19080013.63
4/11/2011532823Euro CeramicsBHAGWANDAS P SHAHS19076413.63
4/11/2011531137Gemstone InvestKIRAN BHIKU BHANAESS6800009.50
4/11/2011531055GFLFINSONAL INTERNATIONAL LTDB1801566.15
4/11/2011531055GFLFINNAMDEO SHANTARAM GOLEB1615066.15
4/11/2011531055GFLFINKIRTI KANTILAL MEHTAB2150066.15
4/11/2011532761HOV ServHEENA GANDHIB6933762.13
4/11/2011532761HOV ServHEENA GANDHIS6933762.39
4/11/2011533676INDO THAIGENUINE STOCK BROKERS PVT. LTD.B5951921.98
4/11/2011533676INDO THAIA K G SECURITIES AND CONSULTANCY LTDB10070321.96
4/11/2011533676INDO THAIGKN SECURITIESB14864521.85
4/11/2011533676INDO THAIGKN SECURITIESS14864521.81
4/11/2011533676INDO THAIA K G SECURITIES AND CONSULTANCY LTDS10120321.91
4/11/2011533676INDO THAIGENUINE STOCK BROKERS PVT. LTD.S5951922.07
4/11/2011514312Jaihind SynNILESH KUMAR LAHOTIB488039.83
4/11/2011506910Jaysynth DyeLAXMIDAS HIRJI THAKKARB5240215.07
4/11/2011530955Kailash FicomSARBA MANGALAM FINE TEX PRIVATE LIMITEDB10000031.10
4/11/2011530955Kailash FicomDINESH N SHAH HUFB9000031.03
4/11/2011530955Kailash FicomDINESH N SHAH HUFS9000031.06
4/11/2011530955Kailash FicomDASH PHARMACEUTICALS PVT LTDS11250031.09
4/11/2011506128Krishna DeepHOTEL POLO TOWERS PRIVATE LIMITEDB25000171.35
4/11/2011590075Lambodhara Tex-$RAMESH SHENOY KS2700023.05
4/11/2011533015Nu Tek IndiaALFA FISCAL SERVICES PVT LTDS11303871.20
4/11/2011533015Nu Tek IndiaCHETAN LAXMIKANT DAVES8643801.17
4/11/2011533632Onelife CapitalR M SHARES TRADING PRIVATE LIMITEDB89671212.97
4/11/2011533632Onelife CapitalA K G SECURITIES AND CONSULTANCY LTDB90050212.90
4/11/2011533632Onelife CapitalCHANDARANA INTERMEDIARIES BROKERS PRIVATE LIMITEDB77695209.63
4/11/2011533632Onelife CapitalGKN SECURITIESB80214209.20
4/11/2011533632Onelife CapitalGKN SECURITIESS80214209.04
4/11/2011533632Onelife CapitalCHANDARANA INTERMEDIARIES BROKERS PRIVATE LIMITEDS77695210.58
4/11/2011533632Onelife CapitalA K G SECURITIES AND CONSULTANCY LTDS90050212.95
4/11/2011533632Onelife CapitalR M SHARES TRADING PRIVATE LIMITEDS89670213.30
4/11/2011505525Parichay InvestSUDHIR KUMAR GUPTAS700027.70
4/11/2011505525Parichay InvestNILA BABUBHAI SHAHS850026.88
4/11/2011531467Polypro FibrilsAJAY RAVINDRA SHAHB3300012.99
4/11/2011512481Polytex IndiaKIRAN BHIKU BHANAESB133000125.00
4/11/2011512481Polytex IndiaKIRAN BHIKU BHANAESS92000125.14
4/11/2011533605Prakash ConstrowellCHANDARANA INTERMEDIARIES BROKERS PRIVATE LIMITEDB71117248.92
4/11/2011533605Prakash ConstrowellCHANDARANA INTERMEDIARIES BROKERS PRIVATE LIMITEDS71117249.72
4/11/2011500357Rama PaperDEEPAK KUMAR SHARMAB60000101.70
4/11/2011511585Regency TrustSHILPA JAINS6245082.01
4/11/2011531886SCOPE INDUMADEVI ALLURIS3864024.91
4/11/2011512413SPECTACLEIFCI FINANCIAL SERVICES LTDS60000012.53
4/11/2011590093TRIMURTHI DRSUNITADEVI SAJJAN NANWALS5200025.03
4/11/2011533576Vaswani IndsM G F GROWTH RESEARCH AND INVESMART LIMITEDB16825012.37
4/11/2011511110VB DesaiBAJAJ HOLDINGS AND INVESTMENT LIMITEDS3286611.51
4/11/2011531015VENMAXRAJEEV KUMAR HARDATTB250002.99
4/11/2011531015VENMAXVINODKUMAR PARAKS250002.99
* B - Buy, S - Sell
** = Weighted Average Trade Price / Trade Price

4/11/11: Categories Turnover (Rs. crore) Clients NRI Proprietary Trade Data

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Categories Turnover
(Rs. crore)
ClientsNRIProprietary
Trade DateBuySalesNetBuySalesNetBuySalesNet
4/11/111,613.091,645.90-32.820.620.600.02450.63439.3211.31
3/11/111,489.041,512.91-23.872.121.990.13450.31431.6618.66
2/11/111,588.301,592.99-4.680.560.340.22474.11465.448.67
Nov , 116,258.566,231.8626.693.853.770.081,829.471,790.9838.49
Since 1/1/11419,476.81424,180.75-4,703.94300.49209.4391.07122,130.10121,255.53874.58

4/11/11 - FII & DII Turnover (BSE + NSE) (Rs. crore)

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FII & DII Turnover (BSE + NSE)
(Rs. crore)
FIIDII
Trade DateBuySalesNetBuySalesNet
4/11/112,256.562,127.94128.62938.47867.9870.49
3/11/111,884.031,868.5815.45973.06971.151.91
2/11/111,469.281,477.06-7.78736.50744.29-7.79
Nov , 117,524.617,408.98115.633,314.593,823.39-508.80
Since 1/1/11   *526,923.46544,785.07-17,861.61245,581.43224,044.7221,536.71

FII DERIVATIVES STATISTICS FOR 04-Nov-2011

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FII DERIVATIVES STATISTICS FOR 04-Nov-2011 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES651561719.38536621404.9553698814111.44314.43
INDEX OPTIONS44046111644.1645491511989.36155311441045.26-345.20
STOCK FUTURES577591430.43550281393.80116993929292.3236.63
STOCK OPTIONS12741326.7913238337.6330191789.67-10.85
      Total-4.99


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