Street View: Indian pharma firm IPCA's Unichem buy expensive, earnings dilutive

Ipca Laboratories

26/04/2023 08:27

** Shares of IPCA Laboratories Ltd  IPCA.NS  fall as much as
7.33% to 686.80 rupees, a fresh three-year low
    ** Stock of the pharma firm lost over 10% on Tuesday after
agreeing to buy a 33.38% stake in Unichem Laboratories  UNBL.NS 
for up to 10.34 billion rupees
    ** Relative strength index of the stock at 21, suggesting it
may be oversold
    
    ACQUISITION EXPENSIVE AND EARNINGS DILUTIVE
    ** Nomura ("neutral", PT of 911 rupees) says IPCA aims to
leverage Unichem's development and manufacturing infrastructure
but sees near-term negative impact from the acquisition for
earnings
    ** Motilal Oswal ("neutral", PT of 760 rupees) cuts FY24 and
FY25 earnings estimates by 11.7% and 5%, respectively, to factor
in reduction in income due to use of cash to fund Unichem
acquisition
    ** Prabhudas Lilladher ("hold", PT of 750 rupees) says
acquisition cost is expensive and dilutive for earnings
    ** PhillipCapital ("neutral", PT of 800 rupees) says
acquisition is strategic, providing access to U.S. market for
IPCA, but will likely mount pressure on margins
    

 (Reporting by Bharath Rajeswaran in Bengaluru)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463))