Ipca Laboratories’ domestic and export formulations underpin earnings and margin growth

Investment View and Valuation

Motilal Oswal Financial Services’ June 1, 2026 results update maintains its Buy view on Ipca Laboratories. The investment thesis rests on sustained outperformance in domestic formulations, a revival in the US and other export markets, and operating leverage.

Motilal Oswal expects a 17% earnings CAGR over FY26-28, supported by a 12% domestic-formulations revenue CAGR and a 20% export CAGR. Return ratios are expected to remain in the mid-teens.

The broker largely maintained its FY27 and FY28 estimates and values Ipca Laboratories at 28 times 12-month forward earnings, resulting in a target price of Rs1,730.

4QFY26 Financial Performance

Ipca Laboratories reported 4QFY26 sales growth of 6.3% year on year to Rs2,388.5 crore, marginally above Motilal Oswal’s estimate of Rs2,358.2 crore. Gross margin expanded 250 basis points year on year to 71%. EBITDA increased 12.8% to Rs483.9 crore, 5% above the broker’s estimate, while EBITDA margin expanded 120 basis points to 20.3% despite other expenses rising by 140 basis points as a share of sales.

Adjusted PAT rose 19.2% year on year to Rs290 crore, in line with the broker’s estimate. Reported results included exceptional expenses of Rs45.8 crore related to the new labour code and a Rs60 crore gain from deconsolidation following the sale of Bayshore Pharmaceuticals LLC.

Formulations, APIs and Subsidiaries

Formulation sales rose 13% year on year to Rs1,458.6 crore and represented 61% of total sales. Domestic formulations increased 12% to Rs853.3 crore, while export formulations grew 16% to Rs605.3 crore.

Generic formulation exports grew 39% to Rs340 crore and branded formulation exports rose 14% to Rs190 crore. Institutional exports declined 33% to Rs74.1 crore. API sales were flat at Rs344.6 crore, with export API sales declining 4% and domestic API sales growing 15%. Subsidiary revenue declined 6% to Rs570 crore.

FY26 Performance

For FY26, revenue, EBITDA and adjusted PAT grew 8%, 15% and 27%, respectively, to Rs9,646.3 crore, Rs1,978.6 crore and Rs1,158 crore.

Domestic-formulations revenue increased 10% to Rs3,817.2 crore. Export-formulations revenue also grew 10% to Rs2,082.6 crore, led by 14% growth in branded exports and 17% growth in generic exports. Combined Ipca and Unichem US revenue rose about 14% to Rs1,570 crore.

API revenue grew 10% to Rs1,395.7 crore, supported by an 18% increase in export APIs, although domestic APIs declined 7%.

FY27 Management Guidance and Growth Drivers

Management guided for consolidated revenue growth of about 12-13% in FY27, domestic-formulations growth of about 12-13% compared with estimated Indian pharmaceutical market growth of 10-11%, and a consolidated EBITDA margin of about 22-23%.

• Unichem’s US business is expected to grow about 10% and deliver a 12-13% EBITDA margin in FY27.
• Ipca expects to commercialise 6-8 additional US products in FY27.
• Unichem expects 5-6 US product launches.

Key Offsets and Risks

The report identifies subdued institutional anti-malaria sales, funding constraints at global procurement agencies, slower domestic API procurement and elevated operating expenses as current offsets to growth.