Ipca Laboratories is a growth stock to keep your eyes on
05-06-2014 • About Ipca Laboratories (
$IPCALAB) • By InTwits
Ipca Laboratories is an attractive growth stock in Pharmaceuticals industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.
Growth story
Ipca Laboratories showed fast growth in the last financial year. The company's revenue surged on 18.3% in FY2014. In addition to revenue Ipca Laboratories also keeps delivering EBITDA growth. It was 29.9% in FY2014
If we look for the longer period Ipca Laboratories showed fast revenue growth of 20.0% from FY2011 to FY2014 annually. EBITDA surged on 28.8% from FY2011 to FY2014 annually.
Ipca Laboratories ($IPCALAB) financials for the last 5 years
| mln. INR | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Revenue | 38,168 | 18,998 | 23,306 | 27,738 | 32,818 |
|---|
| Revenue growth, % | | -50.2% | 22.7% | 19.0% | 18.3% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 3,347 | 3,807 | 5,200 | 6,265 | 8,141 |
|---|
| EBITDA growth, % | | 13.7% | 36.6% | 20.5% | 29.9% |
|---|
| EBITDA margin, % | 8.77% | 20.0% | 22.3% | 22.6% | 24.8% |
|---|
| Net Income | 2,054 | 2,623 | 2,771 | 3,236 | 4,785 |
|---|
| Net Income margin, % | 5.38% | 13.8% | 11.9% | 11.7% | 14.6% |
|---|
| |
| CAPEX | 1,341 | 1,950 | 2,605 | 2,294 | 3,796 |
|---|
| CAPEX/Revenue, % | 3.51% | 10.3% | 11.2% | 8.27% | 11.6% |
|---|
| Debt | 5,044 | 5,698 | 6,011 | 6,170 | 6,026 |
|---|
| Cash | 108 | 104 | 107 | 567 | 743 |
|---|
| Net Debt/EBITDA | 1.5x | 1.5x | 1.1x | 0.9x | 0.6x |
|---|
| |
| ROIC, % | 21.8% | 20.5% | 24.7% | 25.4% | 28.3% |
|---|
| ROE, % | 27.5% | 27.4% | 24.0% | 23.0% | 27.2% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. EBITDA margin increased on 2.20 pp from 22.6% to 24.8% in FY2014. In the longer period EBITDA margin surged on 4.80 pp from 20% in FY2011 to 24.8% in FY2014.
Ipca Laboratories shows attractive ROIC at 28.3% for the last 12 months which assumes stable development model. During the last three years it surged - it was 20.5% in FY2011. It's average ROIC for the last three years was 26.1%.
Net Income margin surged on 2.90 pp from 11.7% to 14.6% in FY2014. In the last 3 years the company's Net Income margin increased on 0.800 pp from 13.8% in FY2011 to 14.6% in FY2014.
Ipca Laboratories operates at ROE of 27.2%. Average ROE for the last three years was 24.8%.
Capital expenditures (CAPEX)
To this fast growth Ipca Laboratories had to invest in CAPEX.The company's CAPEX/Revenue was 11.6% in FY2014. Ipca Laboratories's CAPEX/Revenue surged on 1.30 pp from 10.3% in FY2011 to 11.6% in FY2014. For the last three years the average CAPEX/Revenue was 10.3%.
Leverage (Debt)
Having such a fast growth profile the company keeps low debt level at 0.6x Net Debt/EBITDA. In the longer period leverage dropped on 0.82x from 1.47x in FY2011 to 0.65x in FY2014.
Valuation vs. comparable companies
The company trades at 13.2x EV/EBITDA which is 23% lower than 17.1x Pharmaceuticals industry avearge calculated based on 266 companies. The company trades at 21.3x P/E which is 17% lower than 25.7x Pharmaceuticals industry avearge calculated based on 24 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 24.7x EV/(EBITDA-CAPEX) which is higher vs. -3.4x Pharmaceuticals industry avearge calculated based on 20 companies.
Management team
Ipca Laboratories is run by Premchand Godha as a CEO and by Ajit Kumar Jain as a CFO.
Peers in Pharmaceuticals
Below you can find Ipca Laboratories benchmarking vs. other companies in Pharmaceuticals industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Granules India ($GRANULES) | | -68.4% | 37.6% | 16.9% | 43.4% |
| Marksans Pharma ($MARKSANS) | | -66.6% | 16.7% | 23.3% | 43.3% |
| Sun Pharmaceutical Industries ($SUNPHARMA) | | -87.8% | 39.9% | 40.4% | 42.4% |
| Torrent Pharmaceuticals ($TORNTPHARM) | | -63.5% | 22.7% | 17.7% | 32.2% |
| Abbott India ($ABBOTINDIA) | | -46.4% | 8.2% | 8.7% | 27.3% |
| |
|---|
| Median (29 companies) | | -47.7% | 14.0% | 16.3% | 12.6% |
|---|
| Ipca Laboratories ($IPCALAB) | | -50.2% | 22.7% | 19.0% | 18.3% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top |
|---|
| Dr.Reddy'S Laboratories ($DRREDDY) | 51.7% | | | 52.1% | 57.4% |
| Omega Laboratories ($OMEGALAB) | | | 0.0% | 0.0% | 0.0% |
| |
|---|
| Median (2 companies) | 55.5% | | 46.9% | 26.1% | 28.7% |
|---|
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Sun Pharmaceutical Industries ($SUNPHARMA) | 2.9% | 34.3% | 40.8% | 44.3% | 44.9% |
| Divi'S Laboratories ($DIVISLAB) | 11.2% | 38.1% | 37.2% | 38.2% | 40.2% |
| Dr.Reddy'S Laboratories ($DRREDDY) | 3.0% | 21.7% | 25.8% | 22.9% | 25.1% |
| Natco Pharma ($NATCOPHARM) | 10.2% | 21.3% | 21.5% | 23.2% | 24.9% |
| Dishman Pharmaceuticals & Chemicals ($DISHMAN) | 11.1% | 22.6% | 20.8% | 22.8% | 24.0% |
| |
|---|
| Median (28 companies) | 7.1% | 16.9% | 13.5% | 13.5% | 15.6% |
|---|
| Ipca Laboratories ($IPCALAB) | 8.8% | 20.0% | 22.3% | 22.6% | 24.8% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Granules India ($GRANULES) | 0.9% | 5.3% | 8.8% | 15.2% | 24.3% |
| Dishman Pharmaceuticals & Chemicals ($DISHMAN) | 16.3% | 24.3% | 8.4% | 10.9% | 21.6% |
| Natco Pharma ($NATCOPHARM) | 3.9% | 20.0% | 24.4% | 16.3% | 14.4% |
| Torrent Pharmaceuticals ($TORNTPHARM) | 2.6% | 12.5% | 6.6% | 9.6% | 9.9% |
| Divi'S Laboratories ($DIVISLAB) | 1.6% | 12.4% | 15.6% | 15.9% | 9.8% |
| |
|---|
| Median (23 companies) | 2.8% | 6.7% | 6.6% | 6.5% | 5.8% |
|---|
| Ipca Laboratories ($IPCALAB) | 3.5% | 10.3% | 11.2% | 8.3% | 11.6% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Alembic Pharmaceuticals ($APLLTD) | | | 27.5% | 29.1% | 41.5% |
| Sun Pharmaceutical Industries ($SUNPHARMA) | 15.6% | 18.9% | 24.8% | 31.1% | 35.0% |
| Marksans Pharma ($MARKSANS) | 1.5% | -25.8% | -142.4% | 34.9% | 33.8% |
| Torrent Pharmaceuticals ($TORNTPHARM) | 26.5% | 22.3% | 26.4% | 30.5% | 33.2% |
| Divi'S Laboratories ($DIVISLAB) | 24.9% | 25.6% | 30.6% | 30.4% | 32.3% |
| |
|---|
| Median (43 companies) | 14.8% | 14.6% | 12.3% | 15.4% | 15.7% |
|---|
| Ipca Laboratories ($IPCALAB) | 21.8% | 20.5% | 24.7% | 25.4% | 28.3% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Ind-Swift Laboratories ($INDSWFTLAB) | 3.9x | 4.6x | 5.5x | 16.1x | 19.5x |
| Jubilant Life Sciences Limited ($JUBILANT) | 4.0x | 5.3x | 4.0x | 3.5x | 3.5x |
| Kopran ($KOPRAN) | 6.6x | 6.0x | 4.5x | 3.0x | 3.0x |
| Granules India ($GRANULES) | 2.3x | 2.0x | 2.2x | 2.4x | 2.7x |
| Neuland Laboratories ($NEULANDLAB) | 7.9x | 4.9x | 4.2x | 3.5x | 2.6x |
| |
|---|
| Median (38 companies) | 1.6x | 1.4x | 1.4x | 1.2x | 0.3x |
|---|
| Ipca Laboratories ($IPCALAB) | 1.5x | 1.5x | 1.1x | 0.9x | 0.6x |
