Hot Chips - Stock recommendations for your portfolio

IPCA LABORATORIES | BSE Code: 524494 | Volume: 2438 | CMP: Rs 320

Ipca Laboratories has performed well for Q3 FY12. Its export formulations business grew by 73 per cent on the back of strong growth in the anti-malarial, generic and the promotional business segments. The domestic formulations business, however, grew at a lower rate of six per cent on a YoY basis. The gross and EBITDA margins improved by 235 basis points and 550 basis points respectively. The Indore SEZ facility was inspected by the USFDA in January 2012 without
any adverse observations. The USFDA approval may trigger five-six ANDA approvals for the company. This facility is expected to have a peak revenue potential of Rs 400 crore over the next two-three years. In addition to this, the management has provided guidance for 15 per cent growth in the domestic business in Q4 FY12. The operating margins are expected to improve once the additional field force becomes productive going forward. Investors can look at the scrip from a medium-term perspective.

DR. REDDY'S LABORATORIES | BSE Code: 500124 | Volume: 29000 | CMP: Rs 1620

The company’s results for Q3 FY12 have been good, beating the street’s expectations by substantial margins. This was primarily driven by a higher-than-expected upside from Zyprexa, which contributed USD 99 million to the Q3 FY12
revenues. Excluding this, the overall revenues and those from the US grew by 22 per cent and 40 per cent respectively.
It is expected that a steady stream of limited competition launches in the US market along with healthy trends in Russia/CIS and APIs are likely to keep the earnings visibility clear for the next four-five quarters. With a strong US
pipeline, as also better performance by the US OTC business in 9M FY12, the growth momentum is likely to continue
going forward too. Fondaparinux filing for EU in FY13 and the finalisation of the Fujifilm agreement are under discussion,
which may act as triggers going forward. Investors can look at the scrip from a medium-term perspective.

Disclaimer: The scrips in this column have been recommended with a short-term investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.