Hold Indoco Remedies, target Rs 190: ICICI Direct

ICICI Direct has a hold call on Indoco Remedies Ltd. with a target price of Rs 190. The current market price of Indoco Remedies Ltd. is Rs 191.2. Time period given by the brokerage is 15-18 Months when Indoco Remedies Ltd. price can reach the defined target.

Indoco Remedies Ltd., incorporated in 1947, is a smallcap company with a market cap of Rs 1720.45 crore.

Investment rationale by ICICI Direct

Domestic formulation growth is likely to normalise, going ahead, as the management is hinting at an improvement in distributor inventory days. It is guiding for 15-20% growth in domestic formulations for FY19. On the exports front, the US business continues to face headwinds like Goa warning letter, pricing pressure in the US base business. Similarly, issues raised by UKMHRA are also a matter of concern as this may have implications on the European business. In this backdrop, we maintain thedomestic growth tempo will be the key aspect at which to look. The management is also putting emphasis on cost aspects. Accordingly, measures to improve margins and doing away with non-core capex are some of the tasks undertaken by the management. We ascribe a target price of Rs 190 based on 14x FY20E EPS of Rs 13.5.