This Small Cap Pharma Stock Falls 20.88% From Its 52-Weeks High, Has A Buy Rating

The share price of Indoco Remedies has fallen roughly 20.88% from a 52-week high, but its quarter four results were in line with Prabhudas Lilladher's estimates. The brokerage house feels that the small-cap pharma stock can fetch good gains.

Q4FY23 performance

Indoco Remedies' consolidated revenues ex-other operating income increased by 7% YoY to Rs 4.3bn (up 4% QoQ), in line with the broking firm's estimates. While EBITDA was sharply below our estimates by ~20% led by forex loss and higher other expenses. Adjusted for forex loss, margins came in at 15.2% (down 300 bps QoQ).

The gross margins (ad for other operating income) were up 110bp QoQ to 69.3%. R&D cost came in at 5.6% of sales, up 22% YoY. Thus the resultant PAT declined 36% YoY (down 8% QoQ) to Rs 258mn sharply below our estimates of Rs 400 million.

However, the regulated business grew by 5% YoY to Rs 1.6 billion, whereas the EM business registered a strong growth of 54% YoY, pointed to the brokerage house.

Outlook & Rating

The broking firm feels that the margins will improve and the revenues would further scale up. Therefore the firm remains structurally positive on Indoco Remedies' growth prospects given the MR productivity enhancement along with high penetration in North & East markets, new launches in the US, and higher tender business in the EU market.

"We expect 20% PAT CAGR over FY23-25E. We cut our FY24/FY25 EPS by ~11% factoring in lower margins. At the current market price, the stock is trading at 15x FY25E EPS. We retain our 'Buy' rating with a target price of Rs 400; 18x FY25E EPS." Prabhudas added.

Dividend Details of Indoco Remedies

According to the exchange filing of Indoco Remedies the Board of Directors has recommended a dividend of Rs 2.25 per equity share on a face value of Rs 2/- for the financial year 2022-2023 subject to the approval of shareholders in the ensuing annual general meeting(AGM).

No record date or book closure details and AGM details were shared yet by the company.

Share Price Movement

The latest market price of Indoco Remedies stock closed at Rs 334.75, it ended down by 1.22 on an intraday basis. This small-cap stock plunged sharply by 20.88% from its 52-week high as well, while in the last one year, it has declined by 5.45% but in the last three years, it has surged by 59.52%.

Disclaimer
The stock has been picked up from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the author, or the brokerage firm will not be liable for any losses caused as a result of decisions based on the write-up. Goodreturns.in advises users to consult.