InvestorQ : How did you find the results of IPCA and Granules since both saw fall in profits? Are the stocks worth holding to?
Lavanya Subramanian made post

How did you find the results of IPCA and Granules since both saw fall in profits? Are the stocks worth holding to?

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Anamika Sodhani answered.
2 weeks ago
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Let me talk about the results of IPCA Laboratories first. IPCA reported 13.5% higher sales for the Sep-21 quarter at Rs.1,545 crore. Even half yearly sales were up 7.4% at Rs.3,110 crore. The pain came from the export business with Export income down 7%. The pressure came essentially from institutional exports and API exports. However, the good news was that the domestic formulations sales were up 30% yoy at Rs.698 crore in the quarter.

Net profits of IPCA was down -6.3% at Rs.250.23 crore and this was largely due to weakness in select export baskets. EBITDA was up 2% but got largely neutralized by the forex losses in the quarter. Net margins stood at 16.2% in Sep-21 quarter compared to 19.62% in the year ago Sep-20 quarter. Regarding IPCA, it has a strong franchise and the downturn in exports is temporary due to the China factor and also due to non-availability of containers. Hold on.

Let me turn to Granules India now. It reported 3.52% higher sales for Sep-21 quarter at Rs.888 crore. Even the half yearly sales were up 9.03% at Rs.1,738 crore in the quarter. During the Sep-21 quarter, pharma formulations grew 10%, finished dosages grew by 18% but active pharma ingredients or API sales were down 25% largely due to supply disruption in paracetamol KSM. This happens to the most profitable segment.

As a result, the net profits nearly halved to Rs.80.68 crore in Sep-21 quarter. The supply chain constraints resulted in higher material costs, steeper logistics costs and hidden costs of port congestion. Operating margins fell sharply from 30% to 17% in Sep-21 quarter. Net margins were 9.08% in Sep-21 quarter against to 19.07% in Sep-20 quarter. The stock remains vulnerable to external shocks and hence you need to be cautious on this stock.

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