On Monday, Nomura/Instinet maintained a positive outlook on IPCA Laboratories (NSE:IPCA:IN) by raising the price target to INR1,760 from INR1,722, while keeping a Buy rating on the stock. The adjustment reflects a slightly reduced valuation multiple from 32.5x to 31x, based on the one-year-forward FY27F EPS of INR56.9. The firm's analysis indicates a fair value range for IPCA Laboratories' stock between INR1,650 and INR1,850 by March 2026.
The research firm anticipates IPCA Laboratories to trade at 29-32x one-year-forward earnings. They highlight the company's above-market growth in its domestic formulation business, which is projected to contribute approximately 52% to EBITDA in FY27F. Additionally, increased revenues from generics and Active Pharmaceutical (TADAWUL:2070) Ingredients (API) are expected to provide operating leverage, potentially expanding EBITDA margins beyond FY27F.
Nomura/Instinet's revised price target takes into account the recent decline in peer valuation, which prompted a marginal reduction in the valuation multiple. Despite this adjustment, the firm remains optimistic about IPCA Laboratories' valuation, supported by the company's strong business fundamentals.
The analysts also noted that their earnings estimates for FY25-27F are lower by 4-5%. This decrease is attributed to reduced expectations for institutional sales and slight reductions in revenue estimates for APIs and domestic formulations. The revised estimates and price target suggest that while IPCA Laboratories faces some near-term challenges, its long-term growth trajectory remains robust.
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