Fundamentals

IPCA LABORATORIES

Ticker: 524494 BUY: Rs.708
Target: Rs.808

Ipca Lab is a manufacturer and supplier of active pharmaceutical ingredients (API). During Q4FY18, the domestic formulations' segment grew by 17 per cent YoY due to robust growth in pain and anti-bacterial therapy areas. The company management has estimated growth of 13-14 per cent in this segment over the next year. The generic segment too grew by 19 per cent YoY due to higher contributions from Australian and Russian markets. The company is waiting for the USFDA visits at its three plants in the near term which will enable it to expand its market share and increase volumes. The management has guided 12-14 per cent growth in topline for FY19E. The maintenance capex planned for FY19E is around Rs 100 crore. Due to benefits of under-utilisation of facilities, the margins are expected to improve. Considering these factors, we recommend it as a BUY.



GREAVES COTTON

Ticker: 501455 BUY: Rs.138
Target: Rs.155

Greaves Cotton is a leading manufacturer of diesel and petrol engines having 75 per cent market share in 3-wheeler diesel segment and 45 percent in pumps segment. Its auxiliary power segment's market share improved to 6.5 per cent . It derives revenue from automotive (51%), after market (25%) and farm equipment, trading (24%). In FY18, the volumes for engines and power generation segment grew by 6 per cent and 41 per cent , respectively. It is transforming itself into a fuel agnostic player and has signed agreements with OEMs for the new BS-VI 3-wheeler engines. In the near future, the company is planning to foray into solar and electric pumps. It has also started a service-oriented setup called GreavesCare which caters to the servicing needs of 3-wheelers and 4-wheelers. We expect further growth with new product launches and rising volumes. Thus, we recommend it as a BUY.