In The Pink Of Health

A diversified business model and capability to grow in non-US markets are positives.

- Dhuraivel Gunasekaran

While most Indian pharma players have been facing multiple headwinds over the last few years, Ipca Laboratories has managed to put up a good performance, thanks to its diversified business model.

The stock has rallied almost 82 per cent from our last buy call given in October 2018. Although there may be limited upsides in the near term, the growth prospects over the long run are still intact, given the company’s diversified business model, strong presence in the high-growth therapies in the domestic market and traction in the institutional anti-malaria business.

Ipca’s ability to grow in non-US markets is a key positive, given that other players focussing on the US market continue to face headwinds in the region, leading to a slowdown in growth and reduced profitability.

At the current price of ₹1,233, the stock trades at about 21 times its estimated FY2020-21 per-share earnings; its large-cap peers Sun Pharma, Lupin, Cipla and Dr Reddys trade at 19-22 times their respective FY2020-21 per-share earnings. Investors with a long-term time horizon can accumulate the stock.

Diversified business model