Ipca Labs. (IPCALAB)

FairStock Score: 59/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Clean balance sheet with low debt/equity of 0.17 and Altman Z-Score of 3.91 indicating financial stability
• Healthy earnings quality with Piotroski F-Score of 8/9
• Respectable profitability: ROE 13.09%, ROCE 14.72%, and latest quarterly net profit of ₹364 Cr on sales of ₹2,393 Cr
• Positive free cash flow of ₹451 Cr and promoter holding of 44.72% aligning interests

Concerns

• Expensive valuation: P/E 36.73, P/B 5.56, and EV/EBITDA 60.24
• Price of ₹1,522.95 is far above DCF intrinsic value of ₹953.40 and Graham Number of ₹470.09, implying negative margin of safety
• Revenue growth of only 8.92% and 5-year CAGR of 10.52% does not justify the premium, with PEG at 2.67
• Dividend yield of just 0.26% offers negligible compensation while waiting

AI Analysis

Let me start with what I like. Ipca Labs has a clean balance sheet: debt/equity is just 0.17, and an Altman Z-score of 3.91 suggests no financial distress. The Piotroski score of 8/9 is a good sign—the company's earnings quality and profitability are real, not accounting artefacts. Return on equity of 13.09% and ROCE of 14.72% are respectable, although they don't scream a wide moat. The latest quarter shows sales of ₹2,393 Cr and net profit of ₹364 Cr, and free cash flow of ₹451 Cr means the business can fund itself. Profit growth of 24.73% is attractive, but revenue growth is more modest: 8.92% in the latest year and 10.52% compounded over five years. Now the part that bothers me. At ₹1,522.95, the market cap is ₹38,789 Cr, which is 36.73 times earnings and 5.56 times book value. EV/EBITDA is an eye-watering 60.24. Graham would say the price is a test of rationality. The Graham Number is only ₹470.09, and the DCF intrinsic value I'm given is ₹953.40—both well below the current price. That gives a margin of safety of negative 225%. The 0.26% dividend yield doesn't pay me to wait, and a PEG of 2.67 suggests even forward growth is more than priced in. This is a sound pharmaceutical company, but a wonderful business at a foolish price is not a wonderful investment. If I buy here, I'm betting on years of flawless execution to justify the premium. I'd rather keep this on my watch list. As Buffett says: be fearful when others are greedy. At this valuation, the market is plenty greedy.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer