If the share price of Indoco Remedies drops by over 4%, should you purchase or sell it? the leading brokerages have to say

 If the share price of Indoco Remedies drops by over 4%, should you purchase or sell it? the leading brokerages have to say

The share price of Indoco Remedies saw significant profit-booking in early session on Friday, October 20, falling more than 4% on the BSE the day after increasing by around 2% in response to the company's disclosure of its September quarter profits.

The share price of Indoco Remedies started Friday's trading at 346.20 versus the previous close of 351.05 and dropped 4.14 percent to a level of 336.50. Around 10:40 a.m. on the BSE, the stock traded 4.14 percent down at 336.50 rupees.

On the BSE, the share price of Indoco Remedies reached its 52-week high of 423.10 on January 2 of this year and its 52-week low of 307 on April 26 of this year. The stock has only increased by 5% over the last year, compared to the Sensex, the market benchmark, which has increased by about 11% over the same time.

Results for Q2 for Indoco Remedies

On Thursday, October 19, during market hours, Indoco announced a 13% quarter-over-quarter (QoQ) increase in its Q2FY24 standalone revenue, which increased to 465.2 crores from 413.2 crores in Q1FY24.

EBITDA as a percentage of net sales for the quarter is 15.6% at 72.4 crore, up from 15.2% at 62.9 crore in the previous quarter. When compared to Q1FY24, the business's profit after tax (PAT) for the quarter increased by 28% QoQ to 32.9 crore from 25.7 crore, the company said in its exchange filing on Thursday.

The company's standalone PAT, however, decreased 32% year over year. The company's PAT for the same quarter last year was 48.7 crore, corresponding the company's exchange report.

"Our Q2 performance is mainly fueled by international business, API business, and continued growth by domestic business," stated Aditi Panandikar, Managing Director of Indoco Remedies.

Following the release of the business's Q2 results, shares of the company ended the day 1.67 percent higher on the BSE.

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Generally good broker reports

Even though they adjusted their predictions, several brokerage firms are optimistic about Indoco Remedies shares after the company's Q2 reports.

The stock still has a buy call from brokerage company Prabhudas Lilladher, and its target price has increased from 380 to 385.

To account for poor margins, the brokerage company reduced its EPS (earnings per share) expectations for FY24 and FY25 by around 17% and 6%, respectively.

Prabhudas Lilladher emphasized that while Indoco Remedies' Q2FY24 sales were generally in line with expectations, EBITDA came in 4% under budget due to increased remediation costs. Margin figures after one-off adjustments were close to 17%.

The latest OAI (Official Action Indicated) classification to its Goa unit-2 by the US Food and Drug Administration, according to Prabhudas Lilladher, is unfavorable and would impede development in US sales in FY24. Given the solid domestic franchise, which accounts for 50% of total revenues, and fair values, the brokerage firm is still inherently optimistic about the company's future prospects.

"Over the period FY23–25E, we anticipate a 17% PAT CAGR. The stock is now selling at 17.5 times FY25E EPS at the current market price. As we go ahead, we maintain our "buy" rating and set a revised target price of 385, which values the stock at 18 times its Sept. 2025E EPS. For re-rating, Goa Facility Unit-2 must be resolved quickly, according to Prabhudas Lilladher.

With a target price of $366, another brokerage company, Nirmal Bang, has a "accumulate" call on the stock.

The trading company said that Indoco Remedies is optimistic about development in its domestic business and plans to record 11–12% growth for FY24, despite a poor, acute season in Q2FY24. The business has also projected EBITDA margins of roughly 17%, driven by continuous cost-cutting measures and improved operational leverage.

"We prefer Indoco Remedies because of its substantial contribution to the home market and its strong array of sophisticated goods for the US market. We are worried about the company's underwhelming domestic performance and significant reliance on a few specialized releases for US growth, however. As a result, we have maintained our recommendation of "accumulate" and set a target price of $366, which values the stock at 14 times its Sept. 25E EPS, according to Nirmal Bang.