Ipca Laboratories stock price was down 5% after a lackluster December Quarter FY22 results. While the net profit halved, operating margins tumbled more than eight percentage points in Q3FY23. The company is one of the largest manufacturers and suppliers of active pharmaceutical ingredients (APIs) in the world for over a dozen APIs. Ipca Labs manufactures over 350 formulations and 80 APIs for various therapeutic segments. The company is a therapy leader in India for anti-malarials with a market-share of over 34%.
Ipca Labs standalone revenues at Rs 1,433 crore grew 8% YoY in Q3FY23 supported by domestic formulations business.
After two lackluster quarters, domestic formulation (DF) business reported a high single digit, 8% YoY revenue growth in Q3FY23.
Domestic formulations (DF) revenue at Rs 700 crore constituted 49% of total revenue mix in December Quarter 2022. According to the management, DF revenues might be impacted by national list of essential medicines (NLEM) price reduction of around 15% in March Quarter 2023. NLEM products form 17% of IPCA Labs product portfolio.
Formulation export revenues (28% of total revenues) came in at Rs 400 crore in Q3FY23 supported by strong growth in Europe, Latin America and South East Asia. Formulations exports business increased 15% YoY in Q3FY23 but is held back by US FDA ban of two of Ipca Labs manufacturing sites. Formulation export business is segmented into branded (9% of revenue mix), generic (13% of revenue mix) and institutional (6% of revenue mix) businesses.
APIs revenues were 22% of total revenue mix in Q3FY23. API segment reported positive YoY revenue growth in Q3FY23 after seven quarters. API revenue at Rs 322 crores grew 4% YoY in December Quarter 2022. Slower API business growth was due to pricing challenges and impurities. The management expects recovery in API business from FY24. New molecule addition and capacity addition is expected to improve API growth in the near future.
Operating margins fell to 14.9% in Q3FY23 from 23.5%, a year ago impacted by higher operating cost driven by other expenses (up 33% YoY).
Net profit halved to Rs 120 crore in Q3FY23 from Rs 210 crore, corresponding quarter previous year hit by slower API business growth and high operating expenditure. Investors await US FDA clearance of its Pipariya and Pithampur plants which would contribute strongly to both revenue and profitability growth by restarting US business.
